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The dynamics of informed trading around corporate bankruptcies

Author

Listed:
  • Dang, Viet Anh
  • Nguyen, Dinh Trung
  • Pham, Thu Phuong
  • Zurbruegg, Ralf

Abstract

We investigate the dynamics of informed trading both before and after corporate bankruptcy announcements using high frequency data. Our findings reveal that pre-announcement informed selling attenuates subsequent announcement returns, with this effect being weaker for firms receiving extensive pre-announcement media coverage or adverse news sentiment. We also find that post-announcement informed trading can serve as a predictor of subsequent bankruptcy outcomes. Overall, results are consistent with there being material information leakage, warranting policy efforts to better safeguard less informed investors.

Suggested Citation

  • Dang, Viet Anh & Nguyen, Dinh Trung & Pham, Thu Phuong & Zurbruegg, Ralf, 2024. "The dynamics of informed trading around corporate bankruptcies," Finance Research Letters, Elsevier, vol. 63(C).
    • Handle: RePEc:eee:finlet:v:63:y:2024:i:c:s154461232400415x
    DOI: 10.1016/j.frl.2024.105385
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    More about this item

    Keywords

    Informed trading; Corporate bankruptcy; Public media; High-frequency measures;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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