Bankruptcy and the collateral channel
By: Efraim Benmelech, Nittai K. Bergman.
Contributors: Bergman, Nittai K.; National Bureau of Economic Research.
Series: NBER working paper series -- working paper 15708; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 15708.
Publisher: National Bureau of Economic Research
Published: 2010
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "Do bankrupt firms impose negative externalities on their non-bankrupt competitors? We propose and analyze a collateral channel in which a firm's bankruptcy reduces collateral values of other industry participants, thereby increasing the cost of external debt finance industry wide.  To identify this collateral channel, we use a novel dataset of secured debt tranches issued by U.S.  airlines which includes a detailed description of the underlying assets serving as collateral.  Our estimates suggest that industry bankruptcies have a sizeable impact on the cost of debt financing of other industry participants.  We discuss how the collateral channel may lead to contagion effects which amplify the business cycle during industry downturns"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 3/9/2010.

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