Firms contract capital expenditure and reduce new debt issuance following the bankruptcy of an industry-peer. The spillover effect is transitory and declines with industrial distance. Industries that are financially constrained, geographically concentrated or competitive are more vulnerable to...

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 seven basis point increase in loan spreads. The effect is...

This study shows that corporate bankruptcy events affect the investment and financing policies of geographically proximate firms. Following the bankruptcy of a local peer, non-filing local firms significantly reduce investment expenditures, reduce capital structure leverage, and hold more cash....