Giovanna Nicodano (University of Turin), Bankruptcy, Value Puzzles and the Survivorship Bias, Fédération des Banques Françaises Seminar, June 18, 2018, 12:30–14:00, room MF 323.


This paper argues that a survivorship bias is able to distort upwards the measurement of the average ex-post firm value, because bankruptcy cancels firms with low realized cash flows from databases. This bias increases in bankruptcy probability, giving rise to known pricing puzzles across types of firms. For instance, it generates an ex-post discount on conglomerates when diversification helps survival. Similarly, it makes a parent company appear to trade at a discount relative to its standalone counterpart because the parent survives to recessions more often than the standalone firm. When bankruptcy costs are positive, the bias distorts inference on relative firm efficiency, turning a true ex-ante diversification premium, due to lower expected bankruptcy costs, into an apparent ex-post diversification discount.

Research partnership

Fédération des Banques Françaises Research Initiative