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New research on companies' financial conditions from Harvard Business School faculty on issues including financial liquidity, insolvency, and bankruptcy.
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After Silicon Valley Bank's Flameout, What's Next for Entrepreneurs?

by Avery Forman

Silicon Valley Bank's failure in the face of rising interest rates shook founders and funders across the country. Julia Austin, Jeffrey Bussgang, and Rembrand Koning share key insights for rattled entrepreneurs trying to make sense of the financing landscape.

Using Design Thinking to Invent a Low-Cost Prosthesis for Land Mine Victims

Re: Srikant M. Datar

Bhagwan Mahaveer Viklang Sahayata Samiti (BMVSS) is an Indian nonprofit famous for creating low-cost prosthetics, like the Jaipur Foot and the Stanford-Jaipur Knee. Known for its patient-centric culture and its focus on innovation, BMVSS has assisted more than one million people, including many land mine survivors. How can founder D.R. Mehta devise a strategy that will ensure the financial sustainability of BMVSS while sustaining its human impact well into the future? Harvard Business School Dean Srikant Datar discusses the importance of design thinking in ensuring a culture of innovation in his case, “BMVSS: Changing Lives, One Jaipur Limb at a Time.”

What Does the Failure of Silicon Valley Bank Say About the State of Finance?

by Dina Gerdeman

Silicon Valley Bank wasn't ready for the Fed's interest rate hikes, but that's only part of the story. Victoria Ivashina and Erik Stafford probe the complex factors that led to the second-biggest bank failure ever.

Bankruptcy Spells Death for Too Many Businesses

by Rachel Layne

Hasty liquidations cost creditors billions of dollars a year, research by Samuel Antill finds. What if more bankrupt companies were restructured—and revived—instead? Open for comment; 0 Comments.

COVID Was Supposed to Increase Bankruptcies. Instead, They've Gone Down.

by Rachel Layne

Down economic cycles and increasing unemployment usually usher in a rise in bankruptcies. Not so in the COVID-19 recession, where just the reverse has happened. Research by Raymond Kluender and colleagues. Open for comment; 0 Comments.

Bankruptcy and the COVID-19 Crisis

by Jialan Wang, Jeyul Yang, Benjamin Iverson, and Ray Kluender

Analyzing the impact of the COVID-19 crisis on bankruptcy filing rates in the United States, this study finds that large businesses, small businesses, and consumers experience very different effects of the crisis.

Measuring the Perceived Liquidity of the Corporate Bond Market

by Sergey Chernenko and Adi Sunderam

The liquidity of corporate bond markets is crucial to their functioning. This paper proposes a novel measure of bond market liquidity based on portfolio holdings instead of transaction data. The measure can be applied to asset-backed securities, syndicated loans, and municipal securities for which publicly available data on transactions are not available.

Coronavirus Could Create a 'Bankruptcy Pandemic'

by Dina Gerdeman

An expected explosion in bankruptcy proceedings over the coming months could overwhelm the courts, says Stuart Gilson. Open for comment; 0 Comments.

How Small Businesses Can Survive the Coronavirus Outbreak

by Danielle Kost

COVID-19 will put many small businesses on life support. Karen G. Mills, who has been advising policymakers on aid options, offers guidance to owners on the brink of ruin. Open for comment; 0 Comments.

Trade Creditors' Information Advantage

by Victoria Ivashina and Benjamin Iverson

Trade credit represents about a quarter of the liabilities of US firms. There are several theories explaining this fact. This study reexamines whether suppliers hold private information about their trade partners, by analyzing their behavior in bankruptcy.

An Invitation to Market Design

by Scott Duke Kominers, Alexander Teytelboym, and Vincent P. Crawford

Effective market design can improve liquidity, efficiency, and equity in markets. This paper illustrates best practices in market design through three examples: the design of medical residency matching programs, a scrip system to allocate food donations to food banks, and the recent “Incentive Auction” that reallocated wireless spectrum from television broadcasters to telecoms.

Lessons Unlearned? Corporate Debt in Emerging Markets

by Laura Alfaro, Gonzalo Asis, Anusha Chari, and Ugo Panizza

Emerging markets are contending with a worrisome slowdown in economic growth accompanied by the build-up of corporate debt. Understanding this and other potential vulnerabilities requires knowing more about the state of emerging market corporate balance sheets, the drivers of debt accumulation, and the effects of both on the macroeconomy.

Liquidity Transformation in Asset Management: Evidence from the Cash Holdings of Mutual Funds

by Sergey Chernenko and Adi Sunderam

A key function of many financial intermediaries is liquidity transformation: creating liquid claims backed by illiquid assets. To date it has been difficult to measure liquidity transformation for asset managers. The study proposes a novel measure of liquidity transformation: funds’ cash management strategies. The study validates the measure and shows that liquidity transformation by asset managers is highly dependent on the traditional and shadow banking sectors.

The Quest for Better Layoffs

by Carmen Nobel

Professor Sandra Sucher wants to change the way business thinks about workforce reductions. "We want people to learn about the forces they unleash in the firm when they institute layoffs." Open for comment; 0 Comments.

Detroit Files for Bankruptcy: HBS Faculty Weigh In

by John Macomber, Robert C. Pozen, Eric D. Werker & Benjamin Kennedy

After a long period of economic decline, the city of Detroit filed for bankruptcy protection last week. John Macomber, Robert Pozen, Eric Werker, and Benjamin Kennedy offer their views on some down-the-road scenarios. Closed for comment; 0 Comments.

GM: What Went Wrong and What’s Next

by Staff

For decades, General Motors reigned as the king of automakers. What went wrong? We asked HBS faculty to reflect on the wrong turns and missed opportunities of the former industry leader, and to suggest ideas for recovery. Closed for comment; 0 Comments.

Innovation Corrupted: How Managers Can Avoid Another Enron

by Martha Lagace

The train wreck that was Enron provides key insights for improving corporate governance and financial incentives as well as organizational processes that strengthen ethical discipline, says HBS professor emeritus Malcolm S. Salter. His new book, Innovation Corrupted: The Origins and Legacy of Enron's Collapse, is a deep reflection on the present and future of business. Key concepts include: Enron's stated purpose was too general to permit disciplined and responsible decision-making in the face of difficulty. The lessons of Enron relate to strengthening board oversight, avoiding perverse financial incentives for executives, and instilling ethical discipline throughout business organizations. Directors of public companies can adapt key aspects of the private-equity governance model to ensure that they fulfill their oversight responsibilities. Incentive systems should reward accomplishments other than economic performance, and penalize failures. Companies can take steps to help senior executives avoid the two sources of leadership failure at Enron: personal opportunism and flights to utopianism. Closed for comment; 0 Comments.