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Strategic Bankruptcies and Price Reactions to Bankruptcy Filings

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  • Ena Rose–Green
  • Mark Dawkins

Abstract

This study investigates whether the stock market differentiates between firms that file bankruptcy petitions for strategic reasons and firms that file bankruptcy petitions for financial reasons. We perform both univariate and regression tests on a sample of 245 firms that filed Chapter 11 bankruptcy petitions between 1981 and 1996. After controlling for bankruptcy outcome, probability of bankruptcy, firm financial condition, and firm size, we find that, in the period around bankruptcy filing, firms that file bankruptcy petitions for financial reasons have significantly larger stock price declines than firms that file bankruptcy petitions for strategic reasons.

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  • Ena Rose–Green & Mark Dawkins, 2002. "Strategic Bankruptcies and Price Reactions to Bankruptcy Filings," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 29(9‐10), pages 1319-1335.
    • Handle: RePEc:bla:jbfnac:v:29:y:2002:i:9-10:p:1319-1335
    DOI: 10.1111/1468-5957.00471
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    Cited by:

    1. Stef, Nicolae, 2022. "How does legal design affect the initiation of a firm's bankruptcy?," Economic Modelling, Elsevier, vol. 114(C).
    2. Safaa Mrani & Loulid Adil, 2023. "Corporate failure : A literature review [La défaillance des entreprises : Une revue de littérature]," Post-Print hal-04219260, HAL.

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