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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Main Authors: CATON, Gary L., DONALDSON, Jeffrey, GOH, Jeremy
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 2012
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Online Access: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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spelling 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
institution Singapore Management University
building SMU Libraries
continent Asia
country Singapore
Singapore
content_provider SMU Libraries
collection InK@SMU
language English
topic Chapter 11
Sharegolders
Bankruptcy Filings
Rivals
Finance and Financial Management
spellingShingle 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
description 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.
format 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
publisher Institutional Knowledge at Singapore Management University
publishDate 2012
url 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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