Does Reorganization Adjudication Convey Firm-Specific or Industry-Wide Information? Evidence from Taiwan

Abstract

In this paper, we investigate whether reorganization adjudication only conveys information about the announcer or whether it also provides industry-wide information for rivals. We find evidence of strong information content and information transfer arising from the announcement. Reorganization adjudication announcements are associated with positive share prices for announcers, but produce both positive contagion and negative competitive effects for industry rivals, with the latter dominating. We also develop a neuro-fuzzy model and link it to the input feature selection method of genetic algorithms to examine which rivals are more likely to exhibit a contagion or competitive effect in their equity values.