Zipf law in firms bankruptcy

Using an exhaustive list of Japanese bankruptcy in 1997, we discover a Zipf law for the distribution of total liabilities of bankrupted firms in high debt range. The life-time of these bankrupted firms has exponential distribution in correlation with entry rate of new firms. We also show that the debt and size are highly correlated, so the Zipf law holds consistently with that for size distribution. In an attempt to understand “physics” of bankruptcy, we show that a model of debtor–creditor dynamics of firms and a bank, recently proposed by economists, can reproduce these phenomenological findings.