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Consumer Choice and Corporate Bankruptcy

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  • SAMUEL ANTILL
  • MEGAN HUNTER

Abstract

We estimate the indirect costs of corporate bankruptcy associated with lost customers. In incentivized experiments, randomly informing consumers about a firm's Chapter 11 reorganization lowers their willingness to pay for the firm's products by 17% to 28%. Consumers worry that bankruptcy could reduce product quality or prevent future interactions with the bankrupt firm. On average, 38% of consumers are aware of major bankruptcies. Using our experiments to estimate a structural model, we show that these indirect costs of bankruptcy amount to 12% to 15% of a firm's value. We show that these costs are unlikely to arise before bankruptcy.

Suggested Citation

  • Samuel Antill & Megan Hunter, 2026. "Consumer Choice and Corporate Bankruptcy," Journal of Finance, American Finance Association, vol. 81(3), pages 1485-1529, June.
    • Handle: RePEc:bla:jfinan:v:81:y:2026:i:3:p:1485-1529
    DOI: 10.1111/jofi.70030
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