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Corporate Bankruptcy and Managers' Self-Serving Behavior

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  • Loderer, Claudio F
  • Sheehan, Dennis P

Abstract

The authors investigate whether insiders of bankrupt firms hold less stock or reduce their stockholdings compared to what they observed for insiders of similar firms that do not go bankrupt. They find little evidence of such time-series and cross-sectional differences in spite of the fact that the stock value of bankrupt firms falls by more than 90 percent in the five years preceding bankruptcy. One implication of the results is that the amount of stock owned and the magnitude of the trades undertaken by corporate insiders of both bankrupt and nonbankrupt firms appear to provide no information about firm value. Copyright 1989 by American Finance Association.

Suggested Citation

  • Loderer, Claudio F & Sheehan, Dennis P, 1989. "Corporate Bankruptcy and Managers' Self-Serving Behavior," Journal of Finance, American Finance Association, vol. 44(4), pages 1059-1075, September.
    • Handle: RePEc:bla:jfinan:v:44:y:1989:i:4:p:1059-75
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    Cited by:

    1. Cristina Vespro, 2008. "Essays on understanding financial architecture," ULB Institutional Repository 2013/210588, ULB -- Universite Libre de Bruxelles.
    2. Khaled Abdou & Oscar Varela, 2009. "Is there a puzzle in the failure of venture capital backed portfolio companies?," Applied Financial Economics, Taylor & Francis Journals, vol. 19(18), pages 1439-1452.
    3. Eckbo, B. Espen & Thorburn, Karin S. & Wang, Wei, 2016. "How costly is corporate bankruptcy for the CEO?," Journal of Financial Economics, Elsevier, vol. 121(1), pages 210-229.
    4. Agrawal, Anup & Jaffe, Jeffrey F., 1995. "Does Section 16b deter insider trading by target managers?," Journal of Financial Economics, Elsevier, vol. 39(2-3), pages 295-319.
    5. Laurel Franzen & Xu Li & Oktay Urcan & Mark E. Vargus, 2014. "The Market Response To Insider Sales Of Restricted Stock Versus Unrestricted Stock," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 37(1), pages 99-118, February.
    6. Loderer, Claudio & Martin, Kenneth, 1997. "Executive stock ownership and performance Tracking faint traces," Journal of Financial Economics, Elsevier, vol. 45(2), pages 223-255, August.
    7. Yur-Austin, Jasmine, 1998. "Can insiders bail themselves out before private renegotiation?," Review of Financial Economics, Elsevier, vol. 7(2), pages 197-211.

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