Industry Structure and Ripple Effects of Bankruptcy Announcements
AbstractThe market structure of an industry plays an important role in determining the stock market performance of surviving firms during intra-industry bankruptcy announcements. On evaluating the announcement effects of a survivor sample from each of two industries with very different market structures, namely the airline industry and the railroad industry, we find that the airline sample received significant abnormal returns (positive ripple) while the railroad sample experiences significant abnormal losses (negative ripple). Furthermore, the differences of the abnormal returns from the two samples also are statistically significant. These findings demonstrate support for the market structure hypothesis (MSH), but cast doubt on the contagion effect hypothesis (CEH). Copyright 1996 by MIT Press.
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Bibliographic InfoArticle provided by Eastern Finance Association in its journal The Financial Review.
Volume (Year): 31 (1996)
Issue (Month): 4 (November)
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- Branch, Ben, 2002. "The costs of bankruptcy: A review," International Review of Financial Analysis, Elsevier, vol. 11(1), pages 39-57.
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- Akhigbe, Aigbe & Johnston, Jarrod & Madura, Jeff, 2006. "Long-term industry performance following IPOs," The Quarterly Review of Economics and Finance, Elsevier, vol. 46(4), pages 638-651, September.
- Joann Noe Cross & Robert A. Kunkel, 2012. "Andersen implosion over Enron: an analysis of the contagion effect on Fortune 500 firms," Managerial Finance, Emerald Group Publishing, vol. 38(7), pages 678-688.
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