The Intra-industry Effects of Chapter 11 Filings: Evidence from Analysts’ Earnings Forecast Revisions
Shareholders suffer huge losses when firms they own file Chapter 11. Interestingly, even shareholders of rival companies experience statistically significant losses. We examine how the bad news associated with a bankruptcy filing is transferred to the filing firm’s rivals. Using revisions in analyst...
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sg-smu-ink.lkcsb_research-43892018-07-10T04:30:37Z The Intra-industry Effects of Chapter 11 Filings: Evidence from Analysts’ Earnings Forecast Revisions CATON, Gary L. DONALDSON, Jeffrey GOH, Jeremy Shareholders suffer huge losses when firms they own file Chapter 11. Interestingly, even shareholders of rival companies experience statistically significant losses. We examine how the bad news associated with a bankruptcy filing is transferred to the filing firm’s rivals. Using revisions in analysts’ earnings forecasts as a proxy for changes in expected future cash flows, we find that after a bankruptcy filing the market revises downward its cash flow expectations for rivals. Regression analysis confirms a positive relation between changes in expected cash flow and stock market reactions. These findings are consistent with our hypothesis that bad news associated with bankruptcy filings are transferred to rivals through reductions in expected future cash flows. 2012-06-01T07:00:00Z text application/pdf https://ink.library.smu.edu.sg/lkcsb_research/3390 info:doi/10.22495/cocv9i4c2art7 https://ink.library.smu.edu.sg/context/lkcsb_research/article/4389/viewcontent/IntraIndustryEffectsC11Filings_2012_COC.pdf http://creativecommons.org/licenses/by-nc-nd/4.0/ Research Collection Lee Kong Chian School Of Business eng Institutional Knowledge at Singapore Management University Chapter 11 Sharegolders Bankruptcy Filings Rivals Finance and Financial Management |
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Chapter 11 Sharegolders Bankruptcy Filings Rivals Finance and Financial Management CATON, Gary L. DONALDSON, Jeffrey GOH, Jeremy The Intra-industry Effects of Chapter 11 Filings: Evidence from Analysts’ Earnings Forecast Revisions |
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Shareholders suffer huge losses when firms they own file Chapter 11. Interestingly, even shareholders of rival companies experience statistically significant losses. We examine how the bad news associated with a bankruptcy filing is transferred to the filing firm’s rivals. Using revisions in analysts’ earnings forecasts as a proxy for changes in expected future cash flows, we find that after a bankruptcy filing the market revises downward its cash flow expectations for rivals. Regression analysis confirms a positive relation between changes in expected cash flow and stock market reactions. These findings are consistent with our hypothesis that bad news associated with bankruptcy filings are transferred to rivals through reductions in expected future cash flows. |
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text |
author |
CATON, Gary L. DONALDSON, Jeffrey GOH, Jeremy |
author_facet |
CATON, Gary L. DONALDSON, Jeffrey GOH, Jeremy |
author_sort |
CATON, Gary L. |
title |
The Intra-industry Effects of Chapter 11 Filings: Evidence from Analysts’ Earnings Forecast Revisions |
title_short |
The Intra-industry Effects of Chapter 11 Filings: Evidence from Analysts’ Earnings Forecast Revisions |
title_full |
The Intra-industry Effects of Chapter 11 Filings: Evidence from Analysts’ Earnings Forecast Revisions |
title_fullStr |
The Intra-industry Effects of Chapter 11 Filings: Evidence from Analysts’ Earnings Forecast Revisions |
title_full_unstemmed |
The Intra-industry Effects of Chapter 11 Filings: Evidence from Analysts’ Earnings Forecast Revisions |
title_sort |
intra-industry effects of chapter 11 filings: evidence from analysts’ earnings forecast revisions |
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Institutional Knowledge at Singapore Management University |
publishDate |
2012 |
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https://ink.library.smu.edu.sg/lkcsb_research/3390 https://ink.library.smu.edu.sg/context/lkcsb_research/article/4389/viewcontent/IntraIndustryEffectsC11Filings_2012_COC.pdf |
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