Does peer firms' debt default have positive externalities: The investment efficiency perspective

Abstract

This paper examines the positive externalities of peer firms' debt default based on the investment efficiency perspective using data from Chinese listed companies from 2007 to 2021. We robustly find that peers' debt default significantly increases the focal firm's investment efficiency. Moreover, peers' debt default generates positive externalities through investor attention and product market competition mechanisms. Additionally, our findings indicate that online platform interaction and industry tournament incentive enhance these positive externalities. Our study promotes a more nuanced understanding of debt default.