Studies on the announcement effects of bankruptcy filings have found that when a firm files for Chapter 11 bankruptcy protection its shareholders suffer significant losses. A recent paper extends these findings by investigating the announcement effect on rival companies, while another examines the equity performance of firms emerging from bankruptcy. We combine these two lines of inquiry by examining the effect on rivals when a firm emerges from the protection of Chapter 11. We find both significant negative stock market returns and significant negative revisions in analysts’ earnings forecasts for rivals of successfully reorganized companies.
bankruptcy, stockmarket, firms
Finance and Financial Management | Portfolio and Security Analysis
Corporate Ownership and Control
CATON, Gary L.; DONALDSON, Jeffrey; and GOH, Jeremy.
The Effect of Rivals When Firms Emerge from Bankruptcy. (2008). Corporate Ownership and Control. 6, (2), 304-311. Research Collection Lee Kong Chian School Of Business.
Available at: http://ink.library.smu.edu.sg/lkcsb_research/1775