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Contribution Details
| Type | Working Paper |
| Scope | Discipline-based scholarship |
| Title | Indirect Costs of Financial Distress |
| Organization Unit | |
| Authors |
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| Language |
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| Institution | University of Zurich |
| Series Name | SSRN |
| Number | 3310941 |
| ISSN | 1556-5068 |
| Number of Pages | 79 |
| Date | 2022 |
| Abstract Text | We estimate the indirect costs of financial distress due to lost sales by exploiting real estate shocks and cross-supplier variation in real estate assets and leverage. We show that for the same client buying from different suppliers, the client’s purchases from distressed suppliers decline by an additional 13% following a drop in local real estate prices. The effect is more pronounced in more competitive industries, manufacturing, durable goods, less-specific goods, and when the costs of switching suppliers are low. Our results suggest that clients reduce their exposure to suppliers in financial distress. |
| Free access at | DOI |
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| Digital Object Identifier | 10.2139/ssrn.3310941 |
| Other Identification Number | merlin-id:21805 |
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