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- Title
The Market For Failure: An Examination of Collective Knowledge Theory and What Bond Markets Tell Us About Corporate Bankruptcy Filings.
- Authors
Maslov, Brandon L.
- Abstract
The ability to predict how many large public companies file for bankruptcy protection per year is useful for understanding underlying reasons for economic turmoil. Most literature on the subject does not address aggregate filing frequency, but instead focuses, at a microeconomics level on the reason why an individual firm files for bankruptcy. This Article, however, takes a macroeconomic approach to analyzing the issue. It examines the relationship between large corporate bankruptcy filings and traditional measures of economic health, such as GDP and unemployment rates. It also examines the relationship between bankruptcy filings and corporate bond issuances. The model presented shows that while there is no statistically significant relationship between the filings and the traditional measures of the economy, there does exist a relationship between the number of filings and the issuances of corporate bonds. The Article then uses this finding to explore a theory of collective knowledge--the idea that the aggregate information created by individuals for their own self-interest is more useful than a single source of knowledge--to explain the predictive power of bond issuances.
- Subjects
UNITED States; BANKRUPTCY claims; CORPORATE bonds; ECONOMIC indicators; GROSS domestic product; UNEMPLOYMENT; THEORY of knowledge; MACROECONOMICS
- Publication
DePaul Business & Commercial Law Journal, 2009, Vol 8, Issue 1, p67
- ISSN
1542-2763
- Publication type
Article