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Financial firm bankruptcies, international stock markets, and investor sentiment

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  • Panayiotis Papakyriakou
  • Athanasios Sakkas
  • Zenon Taoushianis

Abstract

We consider bankruptcy announcements of large financial institutions in the United States and examine their impact on an international sample of 66 stock market indices. Employing an event‐study methodology, we find that stock markets exhibit strong adverse reaction in the aftermath of such announcements. Further, we develop a surprise measure, based on the country‐level investor sentiment, and find that stock markets in negatively surprised countries respond quickly by sustaining significantly larger declines in the first three trading days following the announcements. Finally, we examine the reaction of stock markets, conditional on the economic classification of their home countries, and find that stock markets in developing (developed) economies are associated with substantially larger (smaller) economic losses.

Suggested Citation

  • Panayiotis Papakyriakou & Athanasios Sakkas & Zenon Taoushianis, 2019. "Financial firm bankruptcies, international stock markets, and investor sentiment," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 24(1), pages 461-473, January.
    • Handle: RePEc:wly:ijfiec:v:24:y:2019:i:1:p:461-473
    DOI: 10.1002/ijfe.1674
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    Cited by:

    1. Papakyriakou, Panayiotis & Sakkas, Athanasios & Taoushianis, Zenon, 2019. "The impact of terrorist attacks in G7 countries on international stock markets and the role of investor sentiment," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 61(C), pages 143-160.
    2. Juniarti, 2022. "Market Reaction to Capital Expenditure: Evidence from Company in Bankruptcy Risk ," GATR Journals afr220, Global Academy of Training and Research (GATR) Enterprise.
    3. Chris Charalambous & Spiros H. Martzoukos & Zenon Taoushianis, 2022. "Estimating corporate bankruptcy forecasting models by maximizing discriminatory power," Review of Quantitative Finance and Accounting, Springer, vol. 58(1), pages 297-328, January.

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