Journal of Financial Economics Vol. 32 No. 1 1992
Contagion and competitive intra-industry effects of bankruptcy announcements
Abstract
This paper investigates the effect of bankruptcy announcements on the equity value of the bankrupt firm's competitors. On average, bankruptcy announcements decrease the value of a value-weighted portfolio of competitors by 1%. This negative effect is significantly larger for highly levered industries and industries where the unconditional stock returns of the nonbankrupt and bankrupt firms are highly correlated; the effect is significantly positive for highly concentrated industries with low leverage, suggesting that in such industries competitors benefit from the difficulties of the bankrupt firm.
- DOI
- 10.1016/0304-405x(92)90024-r
- Volume
- 32
- Issue
- 1
- Pages
- 45-60
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref