Weathering Distress: Corporate Bankruptcy and Bank Competition

65 Pages Posted: 15 Jul 2017 Last revised: 21 Oct 2021

See all articles by Jess Cornaggia

Jess Cornaggia

Pennsylvania State University - Department of Finance

Mahsa Kaviani

University of Delaware

Hosein Maleki

Florida State University - College of Business

Date Written: May 28, 2021

Abstract

This paper examines whether competitive banking markets affect the likelihood that firms file for bankruptcy. We compile large and unique databases of U.S. public and private corporate bankruptcies and find that bank competition significantly reduces firms' filing rates. Chapter 11 and 7 filings both decrease. The results are not concentrated among any specific bankruptcy outcome and are unlikely to be driven by forum shopping. The effects are geographically widespread and driven by distressed firms' improved access to credit. The effects become stronger during economic downturns and in states that host firms with ex-ante higher probabilities of distress.

Keywords: corporate bankruptcy, bankruptcy resolution, bank competition

JEL Classification: G21, G28, G33

Suggested Citation

Cornaggia, Jess and Kaviani, Mahsa and Maleki, Hosein, Weathering Distress: Corporate Bankruptcy and Bank Competition (May 28, 2021). Available at SSRN: https://ssrn.com/abstract=3002938 or http://dx.doi.org/10.2139/ssrn.3002938

Jess Cornaggia

Pennsylvania State University - Department of Finance ( email )

University Park, PA 16802
United States

HOME PAGE: http://https://directory.smeal.psu.edu/jnc29

Mahsa Kaviani (Contact Author)

University of Delaware ( email )

20 Orchard Rd, Newark, DE
Newark, DE 19716
United States

Hosein Maleki

Florida State University - College of Business ( email )

423 Rovetta Business Building
Tallahassee, FL 32306-1110
United States

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