The agglomeration of bankruptcy

Efraim Benmelech, Nittai Bergman, Anna Milanez, Vladimir Mukharlyamov

Research output: Contribution to journalArticlepeer-review


This paper identifies a new channel through which bankrupt firms undergoing liquidation impose negative externalities on their nonbankrupt peers. The liquidation of a retail chain weakens the economies of agglomeration in any given local area, reducing the attractiveness of retail centers for remaining stores and leading to contagion of financial distress.We find that firms with greater geographic exposure to bankrupt retailers are more likely to close stores in affected areas.We further showthat the effect of these externalities on nonbankrupt peers is higher when affected stores are smaller and are operated by firms in financial distress.

Original languageEnglish
Pages (from-to)2541-2586
Number of pages46
JournalReview of Financial Studies
Issue number7
StatePublished - 1 Jul 2019

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics


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