TY - JOUR
T1 - The Association between Bankruptcy Outcome and Price Reactions to Bankruptcy Filings
AU - Rose-Green, Ena
AU - Dawkins, Mark C.
N1 - This study investigates the association between bankruptcy outcome and the capital market's reaction to bankruptcy filings. Our sample consists of 77 firms that filed bankruptcy petitions between 1980 and 1996. We investigate whether, at the time of bankruptcy filing, the market differentiates between firms that are subsequently liquidated and firms that are subsequently reorganized.
PY - 2000/10/1
Y1 - 2000/10/1
N2 - This study investigates the association between bankruptcy outcome and the capital market's reaction to bankruptcy filings. Our sample consists of 77 firms that filed bankruptcy petitions between 1980 and 1996. We investigate whether, at the time of bankruptcy filing, the market differentiates between firms that are subsequently liquidated and firms that are subsequently reorganized. Our results indicate that liquidated firms have significantly larger negative price reactions at bankruptcy filing than reorganized firms. This result holds after controlling for a going-concern audit report in the period prior to bankruptcy filing, a technical or debt service default in the period prior to bankruptcy filing, firm size, prior Wall Street Journal announcement of a possible bankruptcy filing, firm financial condition, and other predisclosure information. Our findings suggest that the market has a high degree of insight into the subsequent bankruptcy resolution.
AB - This study investigates the association between bankruptcy outcome and the capital market's reaction to bankruptcy filings. Our sample consists of 77 firms that filed bankruptcy petitions between 1980 and 1996. We investigate whether, at the time of bankruptcy filing, the market differentiates between firms that are subsequently liquidated and firms that are subsequently reorganized. Our results indicate that liquidated firms have significantly larger negative price reactions at bankruptcy filing than reorganized firms. This result holds after controlling for a going-concern audit report in the period prior to bankruptcy filing, a technical or debt service default in the period prior to bankruptcy filing, firm size, prior Wall Street Journal announcement of a possible bankruptcy filing, firm financial condition, and other predisclosure information. Our findings suggest that the market has a high degree of insight into the subsequent bankruptcy resolution.
UR - https://journals.sagepub.com/doi/abs/10.1177/0148558X0001500403
U2 - 10.1177/0148558X0001500403
DO - 10.1177/0148558X0001500403
M3 - Article
SN - 0148-558X
VL - 15
JO - Journal of Accounting, Auditing & Finance
JF - Journal of Accounting, Auditing & Finance
ER -