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Systematic Share Price Fluctuations after Bankruptcy Filings and the Investors Who Drive Them


  • Dawkins, Mark C.
  • Bhattacharya, Nilabhra
  • Bamber, Linda Smith


Beginning in the 1990s, firms often continue to trade on the major national exchanges after Chapter 11 bankruptcy filings. For bankruptcies filed from 1993–2003, we find that the more negative the filing period price reaction, the more favorable the immediate post-filing returns, on average. This reversal is not attributable to bid-ask bounce, it holds after controlling for other factors associated with post-filing returns, and it appears more attributable to the activities of large traders than to small traders. Supplementary tests reveal that the pattern of post-filing returns differs significantly for bankruptcies filed in bull versus bear markets. Bankruptcies filed during the 1993 to 1999 bull market enjoy substantial but short-lived reversals averaging one-third of the filing period price plunge. These reversals are inconsistent with efficient assimilation of the bankruptcy information. In contrast, we find no evidence of post-filing reversals for bankruptcies filed from 2000 to 2003.

Suggested Citation

  • Dawkins, Mark C. & Bhattacharya, Nilabhra & Bamber, Linda Smith, 2007. "Systematic Share Price Fluctuations after Bankruptcy Filings and the Investors Who Drive Them," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 42(02), pages 399-419, June.
  • Handle: RePEc:cup:jfinqa:v:42:y:2007:i:02:p:399-419_00

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    Cited by:

    1. Abd Halim Ahmad & Nur Adiana Hiau Abdullah & Kamarun Nisham Taufil Mohd, 2016. "Market reactions to financial distress announcements: Does the market react differently to different outcomes?," Economics Bulletin, AccessEcon, vol. 36(2), pages 601-608.
    2. Li, Yuanzhi & Zhong, Zhaodong (Ken), 2013. "Investing in Chapter 11 stocks: Trading, value, and performance," Journal of Financial Markets, Elsevier, vol. 16(1), pages 33-60.
    3. Meier, Jean-Marie A. & Servaes, Henri, 2014. "Distressed Acquisitions," CEPR Discussion Papers 10093, C.E.P.R. Discussion Papers.
    4. Azusa Takeyama & Nick Constantinou & Dmitri Vinogradov, 2012. "Credit Risk Contagion and the Global Financial Crisis," IMES Discussion Paper Series 12-E-15, Institute for Monetary and Economic Studies, Bank of Japan.
    5. Luís M.S. Coelho & Ruben M.T. Peixinho & Siri Terjensen, 2011. "The intraindustry effects of going concern audit reports," CEFAGE-UE Working Papers 2011_23, University of Evora, CEFAGE-UE (Portugal).
    6. Luís M. S. Coelho & Rúben M. T. Peixinho & Siri Terjensen, 2012. "Going concern opinions are not bad news: Evidence from industry rivals," Working Papers Department of Economics 2012/16, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.

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