Previous studies show that bankruptcy announcements have a significant effect towards competitor's stock return around the bankruptcy announcement date. This study tries to fill the gap to investigate whether prior to bankruptcy, distressed firms already have significant effect on other players in the same industry. Thus, this research aims to examine the effect of industry distress level towards competitor's annual stock return in the same industry. This study uses Altman Z Score to measure

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... ancial distress and categorized the firms as "distressed" and "non distressed" firms. Moreover, this study employs panel data regression tests to 142 non-distressed firms in 2009-2018 listed in Indonesian Stock Exchange. The results suggest that the effect of industry distress level towards competitor's annual stock return is significant. These findings contribute to the literature on financial distress, contagion effect, financing and investment.