Publications
Publications
- Forthcoming
- Journal of Finance
Consumer Choice and Corporate Bankruptcy
By: Samuel Antill and Megan Hunter
Abstract
We estimate the indirect costs of corporate bankruptcy associated with lost customers. In incentivized experiments, randomly informing consumers about a firm’s Chapter 11 reorganization lowers their willingness to pay for the firm’s products by 17%-28%. Consumers worry that bankruptcy could reduce product quality or prevent future interactions with the bankrupt firm. On average, 38% of consumers are aware of major bankruptcies. Using our experiments to estimate a structural model, we show that these indirect costs of bankruptcy amount to 12%-15% of a firm's value. We show that these costs are unlikely to arise before bankruptcy.
Keywords
Consumer Choice; Bankruptcy; Financial Distress; Structural Estimation; Experimental Economics; Hertz; Insolvency and Bankruptcy; Perception; Consumer Behavior
Citation
Antill, Samuel, and Megan Hunter. "Consumer Choice and Corporate Bankruptcy." Journal of Finance (forthcoming).