NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Publications by Sriram Venkataraman

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July 2010Are Consumers Affected by Durable Goods Makers' Financial Distress? The Case of Auto Manufacturers
with Ali Horta├žsu, Gregor Matvos, Chad Syverson: w16197
The financial decisions of durable goods makers can impose spillovers on their consumers. Namely, durable goods provide a consumption stream that frequently depends on services provided by the manufacturer (e.g., warranties, parts, and maintenance). Manufacturer bankruptcy, or even the possibility thereof, threatens this service provision and can substantially reduce the value of its products to their current owners. We test this hypothesis in one of the largest durable goods markets, automobiles, using data on millions of used cars sold at wholesale auctions around the U.S. during 2006-8. We find that an increase in an auto manufacturer's financial distress results in a contemporaneous drop in the prices of its cars at auction, controlling for a host of other influences on price. The esti...

Published: \Indirect Costs of Financial Distress in Durable Goods Industries: The Case of Auto Manufacturers," with Gregor Matvos, Chad Syverson and Sriram Venkataraman, Review of Financial Studies , v. 26, no.5, 2013, pp. 1248-1290.

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