Local bankruptcy and geographic contagion in the bank loan market

Addoum, Jawad M., Kumar, Alok, Le, Nhan and Niessen-Ruenzi, Alexandra 2020, Local bankruptcy and geographic contagion in the bank loan market, Review of Finance, vol. 24, no. 5, pp. 997-1037, doi: 10.1093/rof/rfz023.

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Title Local bankruptcy and geographic contagion in the bank loan market
Author(s) Addoum, Jawad M.
Kumar, Alok
Le, Nhan
Niessen-Ruenzi, Alexandra
Journal name Review of Finance
Volume number 24
Issue number 5
Start page 997
End page 1037
Total pages 41
Publisher Oxford University Press (OUP)
Place of publication Oxford, Eng.
Publication date 2020-09-01
ISSN 1572-3097
1573-692X
Keyword(s) corporate bankruptcy
geographic contagion
bank loans
Summary We examine whether corporate bankruptcies influence bank loan characteristics of geographically proximate firms. Controlling for industry contagion and local economic conditions, firms headquartered near a bankruptcy event experience a 7 basis point increase in loan spreads. The effect is transitory and cannot be fully explained by local correlated information or lenders’ financial health. Instead, the effect is more pronounced for informationally opaque bankruptcies and borrowers, and weakened among loans with relationship lenders and lenders with significant local presence.
Language eng
DOI 10.1093/rof/rfz023
Indigenous content off
Field of Research 1501 Accounting, Auditing and Accountability
1502 Banking, Finance and Investment
HERDC Research category C1.1 Refereed article in a scholarly journal
Copyright notice ©2019, The Authors
Persistent URL http://hdl.handle.net/10536/DRO/DU:30146277

Document type: Journal Article
Collections: Faculty of Business and Law
Department of Finance
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