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Indirect costs of financial distress
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Resumo(s)
We estimate the indirect costs of financial distress due to lost sales by exploiting real estate (RE) shocks and cross-supplier variation in RE assets and leverage. We show that for the same client buying from different suppliers, the client’s purchases from distressed suppliers decline by an additional 13% following a drop in local RE prices. The effect is more pronounced in more competitive industries, manufacturing, durable goods, less-specific goods, and when the costs of switching suppliers are low. Our results suggest that clients reduce their exposure to suppliers in financial distress.
Descrição
Funding Information: We thank two anonymous referees, Chris Parsons (the editor), Heitor Almeida, Murillo Campello, Daniel Carvalho, Vicente Cuñat, Camelia Kuhnen, Ronald Masulis, David Matsa, David Thesmar, and Steven Ongena; participants at the EFA 2019, HEC Paris Workshop on Banking, Finance, Macroeconomics, and the Real Economy; and seminar participants at Aalto University, HEC Paris, King’s College London, Università Cattolica del Sacro Cuore, University of Bristol, University of Cambridge, and University of Zurich for helpful comments. Custódio acknowledges financial support from the European Research Council Grant (project 852577—grow). E.G-A. gratefully acknowledges financial support from the European Research Council (ERC) under the European Union’s Horizon 2020 research and innovation programme ERC ADG 2016-GA: under grant agreement No. 740272: lending. M.A.F. acknowledges support from Fundação para a Ciência e Tecnologia. Funding Information: We thank two anonymous referees, Chris Parsons (the editor), Heitor Almeida, Murillo Campello, Daniel Carvalho, Vicente Cuñat, Camelia Kuhnen, Ronald Masulis, David Matsa, David Thesmar, and Steven Ongena; participants at the EFA 2019, HEC Paris Workshop on Banking, Finance, Macroeconomics, and the Real Economy; and seminar participants at Aalto University, HEC Paris, King’s College London, Università Cattolica del Sacro Cuore, University of Bristol, University of Cambridge, and University of Zurich for helpful comments. Custódio acknowledges financial support from the European Research Council Grant (project 852577-grow). E.G-A. gratefully acknowledges financial support from the European Research Council (ERC) under the European Union’s Horizon 2020 research and innovation programme ERC ADG 2016-GA: under grant agreement No. 740272: lending. M.A.F. acknowledges support from Fundação para a Ciência e Tecnologia. Publisher Copyright: © The Author(s) 2023.
Palavras-chave
Economic distress Financial distress Real estate prices Supply chain Accounting Finance Economics and Econometrics