Does industry-wide distress affect defaulted firms? Evidence from creditor recoveries

• 成果类型: Article; Proceedings Paper
• 署名作者: Acharya, Viral V.; Bharath, Sreedhar T.; Srinivasan, Arland
• 署名单位: University of Michigan System; University of Michigan; University of London; London Business School; National University of Singapore
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2006.05.011
• 发表日期: 2007
• 页码: 787-821
• 关键词: bankruptcy; illiquidity; Asset specificity; loss given default; Credit risk

摘要

Using data on defaulted firms in the United States over the period 1982-1999, we show that creditors of defaulted firms recover significantly lower amounts in present-value terms when the industry of defaulted firms is in distress. We investigate whether this is purely an economic-downturn effect or also a fire-sales effect along the lines of Shleifer and Vishny [1992. Liquidation values and debt capacity: a market equilibrium approach. Journal of Finance 47, 1343-1366]. We find the fire-sales effect to be also at work: Creditors recover less if the industry is in distress and non-defaulted firms in the industry are illiquid, particularly if the industry is characterized by assets that are specific, that is, not easily redeployable by other industries, and if the debt is collateralized by such specific assets. The interaction effect of industry-level distress and asset-specificity is strongest for senior unsecured creditors, is economically significant, and robust to contract-specific, firm-specific, macroeconomic, and bond-market supply effects. We also document that defaulted firms in distressed industries are more likely to emerge as restructured firms than to be acquired or liquidated, and spend longer time in bankruptcy. (c) 2007 Elsevier B.V. All rights reserved.