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Financial Distress Announcements, Transaction Mode Change, and Aggregate Shareholder Wealth: Empirical Evidence from TAIEX-Listed Companies

Author

Listed:
  • Gili Yen

    (Department of Business Administration, Chaoyang University of Technology, Taiwan)

  • Jian-Fa Li

    (Department of Finance, Chaoyang University of Technology, Taiwan)

Abstract

This study is to address the estimation of financial distress costs including the deterioration in asset value. A sample of 104 TAIEX-listed financially distressed companies was collected covering the period from 1998 to 2004. As expected, it is found that the TAIEX-listed financially distressed companies have registered a huge reduction in stock price. Moreover, as expected, it is found that the financial distress costs of the "delisting" group are largest, the financial distress costs of the "maintaining normal trading" group are lowest, and the financial distress costs of the "cash transaction only/suspended trading" group fall somewhere in between. Based on the empirical findings, the present study concludes that the magnitude of financial distress costs is substantially underreported in the literature as a result of ignoring deterioration in asset value.

Suggested Citation

  • Gili Yen & Jian-Fa Li, 2010. "Financial Distress Announcements, Transaction Mode Change, and Aggregate Shareholder Wealth: Empirical Evidence from TAIEX-Listed Companies," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 13(01), pages 19-43.
    • Handle: RePEc:wsi:rpbfmp:v:13:y:2010:i:01:n:s0219091510001858
    DOI: 10.1142/S0219091510001858
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    More about this item

    Keywords

    Financial distress announcements; transaction mode change; aggregate shareholder wealth; financial distress costs; TAIEX-listed companies;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance

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