Indore (Madhya Pradesh): A new study by the Indian Institute of Management (IIM)-Indore has found that corporate bankruptcies can have far-reaching consequences beyond the failed firms themselves -- potentially destabilising even financially healthy companies within the same industry.

Published in the reputed journal ‘Finance Research Letters’, the study titled ‘Bankruptcy Spillovers and Stock Price Crash Risk of Non-Bankrupt Firms’ is co-authored by Prof Radha Mukesh Ladkani of IIM-Indore. It highlights that each additional bankruptcy filing within an industry can increase the likelihood of a stock price crash for non-bankrupt peers by 21 per cent.

The research, which analyses data from listed Indian firms between 2010 and 2021, suggests that waves of bankruptcies create ripple effects

See Full Page