This essay investigates bankruptcy spillover effects on corporate creditors. We employ a difference-in-differences matching estimator strategy to compare the performance of bankrupt firms’ creditors (treated group) and similar firms without any business relationship with a bankrupt firm (control group). We implement a propensity score sample matching to obtain our control group from the population of nontreated firms. Our implicit hypothesis concerns that the treated group might underperform the control group after the bankruptcy event. We create a novel dataset on hand-collected bankruptcy proceedings judicial data from the State Court of São Paulo (TJSP) matched to Brazilian employer-employee administrative data (RAIS). We adopt the number of employees and the total remuneration of employees as proxies for performance to examine the effects of a bankruptcy event on corporate creditors. Our main results indicate that the contagion effects of bankruptcy reach both the treated group (corporate creditors) and control group (similar firms with no direct link to a bankruptcy reorganization event). There is little evidence that the impact is different between the two groups. Moreover, we assume that the adverse spillover effects on both groups are mainly from bankruptcy reorganization cases converted to liquidation. Together the findings suggest that a more profound corporate crisis leading to a liquidation may spill substantially more over other firms linked to the bankrupt firm but also in the local economy or related industries. The findings may extend the current bankruptcy literature to better understand the boundaries of a corporate crisis and contribute to the formulation of legal reforms.
Comissão Organizadora
Anderson Odias da Silva
Claudia Yoshinaga
Ricardo D. Brito
Felipe Saraiva Iachan
Vinicius Augusto Brunassi Silva
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