Industry contagion in loan spreads

Michael Hertzel; Micah S. Officer

doi:10.1016/j.jfineco.2011.10.012

Industry contagion in loan spreads

Michael Hertzel, Micah S. Officer

Finance

Research output: Contribution to journal › Article › peer-review

81 Scopus citations

Abstract

Spreads on new and renegotiated corporate loans are significantly higher when the loan originates (or is renegotiated) in the two years surrounding bankruptcy filings by industry rivals. This industry-specific contagion is particularly severe in the middle of industry bankruptcy waves. Furthermore, this contagion in loan spreads is mitigated in concentrated industries, consistent with the hypothesis and evidence in Lang and Stulz (1992) that bankruptcy filings in concentrated industries can have positive consequences for rivals (increased market share and/or power). There is also some evidence that contagion affects non-spread terms in loan contracts.

Original language	English (US)
Pages (from-to)	493-506
Number of pages	14
Journal	Journal of Financial Economics
Volume	103
Issue number	3
DOIs	https://doi.org/10.1016/j.jfineco.2011.10.012
State	Published - Mar 1 2012

Keywords

Bankruptcy
Contagion
Financial distress
Loan spreads

ASJC Scopus subject areas

Accounting
Finance
Economics and Econometrics
Strategy and Management

Access to Document

10.1016/j.jfineco.2011.10.012

Cite this

@article{e8e61fc9f88d476ca6fdef9e93ea6bec,

title = "Industry contagion in loan spreads",

abstract = "Spreads on new and renegotiated corporate loans are significantly higher when the loan originates (or is renegotiated) in the two years surrounding bankruptcy filings by industry rivals. This industry-specific contagion is particularly severe in the middle of industry bankruptcy waves. Furthermore, this contagion in loan spreads is mitigated in concentrated industries, consistent with the hypothesis and evidence in Lang and Stulz (1992) that bankruptcy filings in concentrated industries can have positive consequences for rivals (increased market share and/or power). There is also some evidence that contagion affects non-spread terms in loan contracts.",

keywords = "Bankruptcy, Contagion, Financial distress, Loan spreads",

author = "Michael Hertzel and Officer, {Micah S.}",

year = "2012",

month = mar,

day = "1",

doi = "10.1016/j.jfineco.2011.10.012",

language = "English (US)",

volume = "103",

pages = "493--506",

journal = "Journal of Financial Economics",

issn = "0304-405X",

publisher = "Elsevier",

number = "3",

}

TY - JOUR

T1 - Industry contagion in loan spreads

AU - Hertzel, Michael

AU - Officer, Micah S.

PY - 2012/3/1

Y1 - 2012/3/1

N2 - Spreads on new and renegotiated corporate loans are significantly higher when the loan originates (or is renegotiated) in the two years surrounding bankruptcy filings by industry rivals. This industry-specific contagion is particularly severe in the middle of industry bankruptcy waves. Furthermore, this contagion in loan spreads is mitigated in concentrated industries, consistent with the hypothesis and evidence in Lang and Stulz (1992) that bankruptcy filings in concentrated industries can have positive consequences for rivals (increased market share and/or power). There is also some evidence that contagion affects non-spread terms in loan contracts.

AB - Spreads on new and renegotiated corporate loans are significantly higher when the loan originates (or is renegotiated) in the two years surrounding bankruptcy filings by industry rivals. This industry-specific contagion is particularly severe in the middle of industry bankruptcy waves. Furthermore, this contagion in loan spreads is mitigated in concentrated industries, consistent with the hypothesis and evidence in Lang and Stulz (1992) that bankruptcy filings in concentrated industries can have positive consequences for rivals (increased market share and/or power). There is also some evidence that contagion affects non-spread terms in loan contracts.

KW - Bankruptcy

KW - Contagion

KW - Financial distress

KW - Loan spreads

UR - http://www.scopus.com/inward/record.url?scp=84855491319&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=84855491319&partnerID=8YFLogxK

U2 - 10.1016/j.jfineco.2011.10.012

DO - 10.1016/j.jfineco.2011.10.012

M3 - Article

AN - SCOPUS:84855491319

SN - 0304-405X

VL - 103

SP - 493

EP - 506

JO - Journal of Financial Economics

JF - Journal of Financial Economics

IS - 3

ER -

Industry contagion in loan spreads

Abstract

Keywords

ASJC Scopus subject areas

Access to Document

Other files and links

Fingerprint

Cite this