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Strategic Bankruptcies and Price Reactions to Bankruptcy Filings
Author(s) -
Rose–Green Ena,
Dawkins Mark
Publication year - 2002
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/1468-5957.00471
Subject(s) - bankruptcy , business , stock (firearms) , stock price , univariate , sample (material) , finance , economics , accounting , mechanical engineering , paleontology , statistics , chemistry , mathematics , chromatography , multivariate statistics , series (stratigraphy) , engineering , biology
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.