Bankruptcy and steel plant shutdowns

The bankruptcies resulting from the American steel industry downturn in the period, 1999–2002, raise the question of whether the bankruptcy process itself led to permanent plant shutdowns and job losses. With information on 110 of the steel plants operating in the United States in 1994, this paper develops empirical models of steel plant closure and firm bankruptcy to see if the latter impacts on the former. Based on survival models, the results provide support for the hypothesis that the bankruptcy of steel companies could have led to viable steel plants closing, and thus, the bankruptcies in themselves may have caused permanent inefficient employment loss.

► This paper develops empirical models of steel plant closure and firm bankruptcy.
► Its goal is to see if firm bankruptcies lead to the closure of economically viable steel plants.
► The results support for the hypothesis that the bankruptcy of steel companies could lead to viable steel plants closing.