Strategic Bankruptcies and Price Reactions to Bankruptcy Filings
Ena Rose-Green and
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Ena Rose-Green: Florida International University,
Journal of Business Finance & Accounting, 2002, vol. 29, issue 9&10, 1319-1335
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. Copyright Blackwell Publishers Ltd 2002.
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