The disciplinary effects of non-debt liabilities: Evidence from asbestos litigation
نویسنده
چکیده
Article history: Received 24 November 2011 Received in revised form 9 August 2013 Accepted 13 August 2013 Available online 27 August 2013 I study firmswith past asbestos ties that suffer from significant increases in legal liabilities after a U.S. Supreme Court ruling in 1999. This event provides a natural experiment setting to estimate the indirect effects of financial distress on real activities. While direct litigation and bankruptcy costs are significant, value computations and clinical evidence at the operational level show that defendant firms suffer only minor indirect costs of financial distress. Furthermore, these firms actively restructure and refocus on core operations during distress. Overall, my results provide support for potentially significant disciplinary effects of non-debt liabilities. © 2013 Elsevier B.V. All rights reserved. JEL classification: G32 G33
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