Publication Type
Journal Article
Version
publishedVersion
Publication Date
6-2012
Abstract
Shareholders suffer huge losses when firms they own file Chapter 11. Interestingly, even shareholders of rival companies experience statistically significant losses. We examine how the bad news associated with a bankruptcy filing is transferred to the filing firm’s rivals. Using revisions in analysts’ earnings forecasts as a proxy for changes in expected future cash flows, we find that after a bankruptcy filing the market revises downward its cash flow expectations for rivals. Regression analysis confirms a positive relation between changes in expected cash flow and stock market reactions. These findings are consistent with our hypothesis that bad news associated with bankruptcy filings are transferred to rivals through reductions in expected future cash flows.
Keywords
Chapter 11, Sharegolders, Bankruptcy Filings, Rivals
Discipline
Finance and Financial Management
Research Areas
Finance
Publication
Corporate Ownership and Control
Volume
9
Issue
4
First Page
262
Last Page
268
ISSN
1810-3057
Identifier
10.22495/cocv9i4c2art7
Publisher
Virtus Interpress
Citation
CATON, Gary L.; DONALDSON, Jeffrey; and GOH, Jeremy.
The Intra-industry Effects of Chapter 11 Filings: Evidence from Analysts’ Earnings Forecast Revisions. (2012). Corporate Ownership and Control. 9, (4), 262-268.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/3390
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.22495/cocv9i4c2art7