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Bankruptcy protection and stock market behavior in the US airline industry

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  • Gong, Stephen X.H.

Abstract

This study examines the effects of bankruptcy protection on the stock market behavior of US airlines and their domestic rivals. We find that Chapter 11 airlines experience both statistically and economically significant adverse price changes at the time of filing for bankruptcy. During the close-to-3 years after filing, however, these airlines experience significantly positive price changes. Their rivals experience significantly positive price reactions both at the time of the filing and up to 3 years post-filing. The evidence is consistent with substantial improvement in the financial condition of the bankrupt airlines after the reorganization, and with rivals gaining from the failures of other airlines.

Suggested Citation

  • Gong, Stephen X.H., 2007. "Bankruptcy protection and stock market behavior in the US airline industry," Journal of Air Transport Management, Elsevier, vol. 13(4), pages 213-220.
    • Handle: RePEc:eee:jaitra:v:13:y:2007:i:4:p:213-220
    DOI: 10.1016/j.jairtraman.2007.03.003
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    References listed on IDEAS

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    Cited by:

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    2. Yaghoub Abdi & Xiaoni Li & Xavier Càmara-Turull, 2023. "Firm value in the airline industry: perspectives on the impact of sustainability and Covid-19," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-24, December.
    3. Stephen X. H. Gong, 2008. "Event Study in Transport Research: Methodology and Applications," Transport Reviews, Taylor & Francis Journals, vol. 29(2), pages 207-222, May.
    4. Dobruszkes, Frédéric & Van Hamme, Gilles, 2011. "The impact of the current economic crisis on the geography of air traffic volumes: an empirical analysis," Journal of Transport Geography, Elsevier, vol. 19(6), pages 1387-1398.
    5. repec:ipg:wpaper:2014-080 is not listed on IDEAS
    6. de Oliveira, Renan P. & Oliveira, Alessandro V.M., 2021. "Financial distress, survival network design strategies, and airline pricing: An event study of a merger between a bankrupt FSC and an LCC in Brazil," Journal of Air Transport Management, Elsevier, vol. 92(C).
    7. Nicolau, Juan Luis & Sharma, Abhinav, 2022. "A review of research into drivers of firm value through event studies in tourism and hospitality: Launching the Annals of Tourism Research curated collection on drivers of firm value through event stu," Annals of Tourism Research, Elsevier, vol. 95(C).
    8. Li-Chen Cheng & Wei-Ting Lu & Benjamin Yeo, 2023. "Predicting abnormal trading behavior from internet rumor propagation: a machine learning approach," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-23, December.
    9. Pires, Heloisa Márcia & Fernandes, Elton, 2012. "Malmquist financial efficiency analysis for airlines," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 48(5), pages 1049-1055.
    10. Cheng, Yung-Hsiang & Yang, Ann Shawing & Liu, Yen Hua, 2009. "Financial investment behavior tendencies of air carriers," Journal of Air Transport Management, Elsevier, vol. 15(6), pages 354-356.
    11. repec:ipg:wpaper:2014-085 is not listed on IDEAS
    12. Lee, Jae Woon & Yoon, Seung Young, 2024. "Growing stakeholderism in the airline industry after the COVID-19 pandemic," Journal of Air Transport Management, Elsevier, vol. 116(C).

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