Paper Info
Title
Chain of Firms' Bankruptcy: a Macroscopic Study of Link Effect in a Production Network
Abstract
A link in a supplier-customer network is usually a creditor-debtor relationship. If a firm goes into a state of financial insolvency or bankruptcy, then firms on its upstream are affected secondarily along the links. By using 10-year data from recent data on bankruptcy in Japan, we show that this "link effect" is by no means negligible in a nationwide economy. While the total debt of bankruptcy typically amounts to as much as a few percent of GDP in Japan, nearly 20% of all bankruptcies are due to the link effect. Interestingly, we find that such a link effect becomes comparable with other causes of bankruptcy, including poor performance in business (namely solo failure) with respect to the number of events, as the bankruptcy is larger. This means that the link effect grows for larger bankruptcies. Because the supplier-customer network has a heavy tail in its degree distribution, the ripple effect due to the bankruptcy chain is considerable. Since every firm is embedded in a giant network of production, this study would suggest the importance of understanding the heterogeneity in the large-scale network of suppliers and customers on a nationwide scale.
Year
DOI
Venue
2008
10.1142/S0219525908001994
ADVANCES IN COMPLEX SYSTEMS
Keywords
Field
DocType
Supplier-customer network,bankruptcy chain,power law,econophysics
Financial economics,Economics,Insolvency,Commerce,Degree distribution,Monetary economics,Econophysics,Bankruptcy,Heavy-tailed distribution,Debt ratio,Ripple effect
Journal
Volume
Issue
ISSN
11
5
0219-5259
Citations 
PageRank 
References 
3
0.45
1
Authors
1
Name
Order
Citations
PageRank
Yoshi Fujiwara15811.10