Financial distress and corporate investment

Item Type Conference or Workshop Item (Paper)
Abstract This paper analyzes whether the financial distress of a firm affects the investment decisions of non-distressed competitors. On average, firms in distress impose indirect costs to non-distressed competitors by increasing costs of credit in the industry and hence restricting credit access and investment. These average negative spillover effects continue to hold in the absence of industry downturns. However, the negative effects are temporary, and are mitigated for firms with stronger balance sheets or in concentrated markets. These results are consistent with theories suggesting that firms with strong balance sheets prey on their weaker rivals to improve their market position.
Authors García-Appendini, Emilia
Language English
Subjects business studies
economics
finance
HSG Classification contribution to scientific community
Date 16 January 2017
Event Title 2017 Latin American Conference
Event Location Mexico City
Event Dates 16-17 February 2017
Contact Email Address emilia.garcia@unisg.ch
Depositing User Beatrix Kobelt-Glock
Date Deposited 06 Mar 2017 08:41
Last Modified 17 Jan 2018 15:27
URI: https://www.alexandria.unisg.ch/publications/250533

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García-Appendini, Emilia: Financial distress and corporate investment. 2017. - 2017 Latin American Conference. - Mexico City.

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https://www.alexandria.unisg.ch/id/eprint/250533
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