Bankruptcy and Distress
Paper Session
Monday, Jan. 5, 2026 8:00 AM - 10:00 AM (EST)
- Stavros Panageas, University of California-Los Angeles
Can Nonprofits Save Lives Under Financial Stress? Evidence from the Hospital Industry
Abstract
Previously dominated by nonprofit hospitals, the U.S. hospital industry has seen a dramatic growth of for-profit hospitals. We show that the vulnerability of for-profit hospitals to external financing shocks can generate adverse consequences for local communities. Using confidential patient-level discharge data, we show that negative shocks to hospitals’ debt capacity lead to a greater increase in patient mortality in for-profit hospitals than in nonprofit ones. This differential effect is not driven by differences in patient characteristics or patient-hospital sorting. It is concentrated among vulnerable patient populations, namely those without private insurance and greater health risks. We elucidate a mechanism: coerced precautionary savings of nonprofit hospitals. To qualify as a nonprofit entity in the U.S., a hospital must conform to nondistribution laws, which prohibits distribution of earnings to ownership. Likely due to these nondistribution laws, nonprofit hospitals hold deeper cash reserves and thus maintain spending on medical staff and equipment during adverse financing shocks. Overall, our evidence suggests that nonprofit hospitals are less affected by capital market shocks and can better serve social interests during financially challenging times. Furthermore, these findings suggest that the secular shift of hospitals towards a for-profit model may weaken the resiliency of the U.S. healthcare system.When Debt Relief Hits Main Street: Evidence from the Indirect Channel of Consumer Credit Access
Abstract
Using administrative U.S. Census data, this paper investigates how weakened creditor rights — designed to offer consumer debt relief — create unintended economic spillovers by restricting con- sumer access to credit. Leveraging staggered adoptions of third-party debt collection restrictions and granular household data, I show that consumers in states with weakened creditor rights ex- hibit reduced spending using credit relative to nearby peers. Consistent with reduced consumer demand, further analyses based on confidential establishment-level data document that businesses in law-shocked states experience lost revenue, especially for nontradable goods and discretionary purchases, as well as reduced employment and payroll. The findings highlight that, in addition to the direct firm borrowing channel, creditor rights affect local entrepreneurial activity through a novel indirect channel of consumer credit access.Dissecting the Product Market Consequences of Bankruptcy:Evidence from 300 Million Retail Transactions
Abstract
Leveraging data on millions of retail transactions, this paper traces the multifaceted product market consequences of bankruptcy, disentangling the role of prices, quantities, and product offerings in the performance of bankrupt firms and their competitors, assessing implications for consumer welfare. Our firm-, product-, time-, point of sale-level matching test strategy shows that the continuing products of bankrupt firms generate less revenue due to lower quantities sold — not prices — relative to similar products of solvent competitors. While in bankruptcy, firms alter their portfolio of products, retaining those with higher ``product-beta'' — our novel measure of a product's risk based on the sensitivity of sales to consumption — suggesting an option-like strategy that bets on state-contingent upside payoffs. Those firms discontinue the supply of products to entire geographies, withdrawing from economically disadvantaged and underserved locations, creating ``product deserts.'' Our granular matching further shows that rivals engage in price wars only after a firm files for bankruptcy and where they compete with similar products. Only firms undergoing liquidation engage in product fire sales, while firms that eventually emerge from bankruptcy maintain their prices on par with those of local competitors.Discussant(s)
Simcha Barkai
,
Boston College
Tong Liu
,
Massachusetts Institute of Technology
Brittany Lewis
,
Washington University in St. Louis
Shohini Kundu
,
University of California-Los Angeles
JEL Classifications
- G3 - Corporate Finance and Governance