Intra-Industry Spillover Effects: Evidence from Bankruptcy Filings

50 Pages Posted: 20 May 2016 Last revised: 17 Nov 2021

See all articles by Nhan Le

Nhan Le

Australian National University

Phong T. H. Ngo

Australian National University (ANU)

Date Written: November 17, 2021


Firms contract capital expenditure, reduce new debt issuance, and face a higher cost of debt following the bankruptcy of an industry peer. The spillover effect declines with industrial distance and strengthens with the saliency of the bankruptcy. Furthermore, industries that are externally financially dependent are more vulnerable to the contagion effect. The investment contraction is not driven by industry asset reallocation, the presence of distressed firms, or strategic competitive behavior by peers. We establish causality by identifying idiosyncratic bankruptcies and implementing an instrumental variable estimation to mitigate the confounding effect of general industry conditions.

Keywords: Bankruptcy, Contagion, Spillovers, Investment

JEL Classification: G31, G32, G33

Suggested Citation

Le, Nhan and Ngo, Phong T. H., Intra-Industry Spillover Effects: Evidence from Bankruptcy Filings (November 17, 2021). Available at SSRN: or

Nhan Le

Australian National University ( email )

26C Kingsley Street
Acton, Australian Capital Territory 2601

HOME PAGE: http://

Phong T. H. Ngo (Contact Author)

Australian National University (ANU) ( email )

RSFAS, College of Business and Economics
Australian National University
Canberra, Australian Capital Territory 0200
+61 2 6125 1079 (Phone)


Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics