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Contribution Details

Type Journal Article
Scope Discipline-based scholarship
Title Indirect Costs of Financial Distress
Organization Unit
  • Claudia Custodio
  • Miguel Ferreira
  • Emilia Garcia
Item Subtype Original Work
Refereed Yes
Status Published in final form
  • English
Journal Title Review of Finance
Publisher Oxford University Press
Geographical Reach international
ISSN 1572-3097
Volume 27
Number 6
Page Range 2233 - 2270
Date 2023
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.
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Digital Object Identifier 10.1093/rof/rfad014
Other Identification Number merlin-id:23391
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