Inter-firm linkages and the wealth effects of financial distress along the supply chain

Michael Hertzel, Zhi Li, Micah S. Officer, Kimberly J. Rodgers

Research output: Contribution to journalArticlepeer-review

360 Scopus citations

Abstract

Extant research examines the extent to which bankruptcy has intra-industry valuation consequences. This study broadens the investigation by examining the wealth effects of distress and bankruptcy filing for suppliers and customers of filing firms. On average, important wealth effects occur prior to and at bankruptcy filings and extend beyond industry competitors along the supply chain. Specifically, distress related to bankruptcy filings is associated with negative and significant stock price effects for suppliers. Supplier wealth effects are more negative when intra-industry contagion is more severe. We also investigate the importance of industry structure, specialized product nature, and leverage on supply chain effects.

Original languageEnglish (US)
Pages (from-to)374-387
Number of pages14
JournalJournal of Financial Economics
Volume87
Issue number2
DOIs
StatePublished - Feb 2008

Keywords

  • Bankruptcy
  • Contagion
  • Financial distress
  • Supply chain

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics
  • Strategy and Management

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