Structural models of capital structure frequently have similar implications for the data that we observe, yet are typically not tested against alternative specifications. We examine the predictions of structural models, and develop a formal methodology for testing amongst alternatives. We show...

We document that suppliers to purely financially distressed companies that are highly likely to reorganize in bankruptcy incur little or no spillover costs. In contrast, suppliers to economically distressed firms experience large losses in market value which are linked to proxies for the cost of...