Bankruptcy and the Collateral Channel
Name
Bergman_Bankruptcy and.pdf
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555.52 KB
Format
Adobe PDF
Checksum (MD5)
131fcb2dca07c74c61e82a2a6942f8ba
Author(s)
Benmelech, Efraim
Bergman, Nittai
Date Issued
March 2011
Journal
Journal of Finance
Publisher
American Finance Association
Citation
BENMELECH, EFRAIM, and NITTAI K. BERGMAN. “Bankruptcy and the Collateral Channel.” The Journal of Finance 66.2 (2011) : 337-378.
Version
Author's final manuscript
Abstract
Do bankrupt firms impose negative externalities on their nonbankrupt competitors? We propose and analyze a collateral channel in which a firm’s bankruptcy reduces the collateral value of other industry participants, thereby increasing their cost of debt financing. We identify the collateral channel using novel data of secured debt tranches issued by U.S. airlines that include detailed descriptions of the underlying collateral pools. Our estimates suggest that industry bankruptcies have a sizeable impact on the cost of debt financing of other industry participants. We discuss how the collateral channel may lead to contagion effects that amplify the business cycle during industry downturns.
MIT Department
Sloan School of Management
Terms of Use
Creative Commons Attribution-Noncommercial-Share Alike 3.0
Persistent DSpace Link
DOI of Published Version
https://doi.org/10.1111/j.1540-6261.2010.01636.x
