Bad news does not always travel fast: evidence from Chapter 11 bankruptcy filings. (10th December 2013)

• Record Type: Journal Article
• Authors: Coelho, Luís Miguel Serra; Berkman, Henk
• Is Part Of: Accounting and finance. Volume 55:Number 2(2015:Jun.)
• Page Start: 415
• Page End: 442
• Publication Date: 2013-12-10
• Subjects: Accounting -- Periodicals; Finance -- Periodicals; 657.05
• DOI: 10.1111/acfi.12063
• Languages: English
• ISSNs: 0810-5391

Abstract

<abstract abstract-type="main" id="acfi12063-abs-0001"> <title>Abstract</title> <p>This paper examines the stock price performances of 275 non‐financial, non‐utility U.S. industrial firms that continue trading on the main exchanges after filing for Chapter 11 bankruptcy between 1 October 1979 and 17 October 2005. This paper identifies a negative and statistically significant post‐bankruptcy drift that lasts for at least 6 months. This finding adds to the literature showing that the market is unable to process bad public news events in a timely manner. Further analysis suggests that the theoretical model proposed by Hong and Stein (1999) can be used to help explain this market‐pricing anomaly.</p> </abstract>