{"content":[{"text":"Feedback and Contagion Through \n Distressed Competition","bbox":{"left":0.242562,"top":0.094999,"width":0.514874,"height":0.07101200000000002}},{"text":"Hui Chen","bbox":{"left":0.178721,"top":0.192287,"width":0.102415,"height":0.022208000000000006}},{"text":"Winston Wei Dou","bbox":{"left":0.334841,"top":0.192287,"width":0.18469600000000003,"height":0.022208000000000006}},{"text":"Hongye Guo","bbox":{"left":0.573218,"top":0.192287,"width":0.13406200000000001,"height":0.022208000000000006}},{"text":"Yan Ji∗","bbox":{"left":0.760984,"top":0.192287,"width":0.06843500000000002,"height":0.02258199999999999}},{"text":"December 10, 2020","bbox":{"left":0.402507,"top":0.230017,"width":0.19498600000000005,"height":0.022207999999999978}},{"text":"Abstract","bbox":{"left":0.465846,"top":0.275008,"width":0.068307,"height":0.017025000000000012}},{"text":"Firms tend to compete more aggressively in ﬁnancial distress; the intensiﬁed compe- \n tition in turn reduces proﬁt margins for everyone, pushing some further into distress. To \n study such feedback and contagion effects, we incorporate dynamic strategic competition \n into an industry equilibrium with long-term defaultable debt, which generates various \n peer interactions: predation, self-defense, and collaboration. Such interactions make cash \n ﬂows, stock returns, and credit spreads interdependent across ﬁrms. Moreover, indus- \n tries with higher idiosyncratic-jump risks are more distressed, yet also endogenously \n less exposed to aggregate shocks. Finally, we exploit exogenous variations in market \n structure – large tariff cuts – to test the core competition mechanism.","bbox":{"left":0.153165,"top":0.305593,"width":0.6960890000000001,"height":0.18673099999999998}},{"text":"Keywords: Stock and Bond Returns, Supergames, Predatory Price Wars, Collective Entry \n Prevention, Tacit Collusion, Financial Distress Anomaly (JEL: G12, L13, O33, C73)","bbox":{"left":0.153701,"top":0.52338,"width":0.693295,"height":0.03836600000000001}},{"text":"∗Chen: MIT Sloan and NBER. Dou and Guo: University of Pennsylvania (Wharton). Ji: Hong Kong \n University of Science and Technology. We are grateful to Frederico Belo, Lorenzo Garlappi, Itay Goldstein, \n Joao Gomes, Lars-Alexander Kuehn, Erwan Morellec, Lukas Schmid, Robert M. Townsend, Jessica Wachter, \n Neng Wang, and Wei Xiong for detailed discussions and comments. We also thank Andy Abel, Jess Benhabib, \n Utpal Bhattacharya, Alexandre Corhay, Sudipto Dasgupta, Itamar Drechsler, Jan Eberly, Vincent Glode, Vidhan \n Goyal, Zhiguo He, Zongbo Huang, Urban Jermann, Ken Judd, Ron Kaniel, Don Keim, Richard Kihlstrom, Tim \n Landvoigt, Kai Li, Wenhao Li, Ye Li, Ernest Liu, Xuewen Liu, Zheng Liu, Deborah Lucas, Jianjun Miao, Thien \n T. Nguyen, Yoshio Nozawa, Lin Peng, Krishna Ramaswamy, Nick Roussanov, Mike Schwert, Ji Shen, Rob \n Stambaugh, Yajun Wang, Chaojun Wang, Pengfei Wang, Wei Wang, Colin Ward, Jialin Yu, Alminas Zaldokas, \n and participants at the Conference on Systemic Risk and Financial Stability, CUHK-Shenzhen, Federal Reserve \n Bank of Richmond, Finance, Organizations and Markets (FOM) Research Group Conference, HKUST and \n Jinan Macro Workshop, HKUST, Macro Finance Society Workshop, McGill-HEC Winter Conference, MFA, \n EFA, NBER Summer Institute (Capital Markets and the Economy), NFA, Peking University, PHBS Workshop \n on Macroeconomics and Finance, Stanford SITE, Swiss Finance Institute at Ecole Polytechnique Fédérale de \n Lausanne (EPFL), University of Texas at Dallas, Wharton Micro Virtual Seminar, and Wharton MLG seminar \n for comments. Winston Dou is grateful for the ﬁnancial support of the Rodney L. White Center for Financial \n Research and the Mack Institute for Innovation Management. Yan Ji is grateful for the ﬁnancial support of the \n Hong Kong RGC ECS Grant (Project No. 26502619).","bbox":{"left":0.105377,"top":0.602469,"width":0.7907759999999999,"height":0.334423}}],"images_bbox":[],"images_bbox_not_text_overlap":[]}