Atlantis Press Paper Details: Chain of Firms Bankruptcy

A link in production network is usually a creditor-debtor 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.

		back to author index

title:		Chain of Firms Bankruptcy
publication:		JCIS-2006 Proceedings
part of series:		Advances in Intelligent Systems Research
ISBN:		978-90-78677-01-7
ISSN:		1951-6851
DOI:		doi:10.2991/jcis.2006.330 (how to use a DOI)
author(s):		Yoshi Fujiwara
corresponding author:		Yoshi Fujiwara
publication date:		October 2006
keywords:		production network, bankruptcy chain, power-law, econophysics
abstract:		A link in production network is usually a creditor-debtor 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.
copyright:		© Atlantis Press. This article is distributed under the terms of the Creative Commons Attribution License, which permits non-commercial use, distribution and reproduction in any medium, provided the original work is properly cited.
full text:		JCIS06-CIEF-261.pdf (371 K)