Chain of Firms Bankruptcy
نویسنده
چکیده
A link in production network is usually a creditordebtor relationship. If a firm goes into financial insolvency state or bankruptcy, then firms on its upstream can have secondary effect from the bankruptcy. By using the recent 10 years data of bankruptcy in japan, we show that these causes of “link effect” are by no means negligible. Indeed, nearly 20% of total debt (a few percent of GDP) is due to such effect. Moreover, the link effect dominates, in probability, other causes of bankruptcy, such as poor performance in business, in the power-law regime of the distribution of debt when bankrupted. Because the production network has a heavy tail in degree distribution, and the effect due to bankruptcy chain is considerable in its ripple effect.
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