Investing in Bankrupt Firms
The authors examine the investment characteristics of firms electin g to enter bankruptcy between 1973 and 1982. Comparisons are made before and after the Bankruptcy Reform Act of 1978. The results indicate that the 1978 Act had no significant impact on bankruptcy decisions or resolutions for actively traded firms. Trading in bankru pt firms' securities is becoming more common, but no abnormal returns appear to be available. Systematic risk does not change significantl y with the filing of bankruptcy, but there is a significant increase in return variance. The financial markets also react to various announcements of stages in the reorganization process. Copyright 1988 by American Finance Association.
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Volume (Year): 43 (1988)
Issue (Month): 5 (December)
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