This paper examines how credit risk spillovers affect corporate financial flexibility. We construct separate empirical proxies to disentangle the two channels of credit risk spillovers—credit risk contagion (CRC), where one firm's default increases the distress likelihood of another; and...

We find robust evidence that supplier diversification is negatively related to the presence of principal corporate customers. This negative relation is stronger for firms with greater agency risk and major customer monitoring intensity, and weaker for firms with greater operating risk and major...