Bankruptcy as a planned business strategy? Evidence from the stock market

IF 3.1 Q2 MANAGEMENT Management Research Review Pub Date : 2024-08-20 DOI:10.1108/mrr-11-2022-0771
Luís Miguel Serra Coelho
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Abstract

Purpose

This paper aims to investigate how the US stock market deals with the announcement of a strategic Chapter 11, a special type of corporate bankruptcy in which companies seek the protection of the law not as a last resort but as a planned business decision.

Design/methodology/approach

An event study is conducted by using data concerning a group of US publicly traded companies that entered Chapter 11 for both strategic and nonstrategic reasons. Regression analysis is also used for robustness purposes.

Findings

This study reveals that initiating both strategic and nonstrategic Chapter 11 proceedings results in negative and statistically significant abnormal stock returns before and at the bankruptcy announcement date. However, in the period following the filing, the market gradually views strategic bankruptcy cases as positive news, whereas nonstrategic Chapter 11 filings continue to be perceived as distinctly negative.

Originality/value

To the best of the author’s knowledge, this is the first paper that documents an asymmetric market reaction to the announcement of Chapter 11, suggesting that, in certain circumstances, managers can add value by filing a strategic bankruptcy.

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破产是一种有计划的商业策略?来自股票市场的证据
本文旨在研究美国股市如何应对战略破产保护的宣布,战略破产保护是一种特殊类型的公司破产,公司寻求法律保护并非不得已而为之,而是一项有计划的商业决策。设计/方法/方法本文使用一组因战略和非战略原因而进入破产保护程序的美国上市公司的数据进行了一项事件研究。研究结果本研究揭示,战略性和非战略性破产保护程序的启动会导致在破产宣布日之前和破产宣布日的股票回报率出现负值,且在统计上有显著的异常。原创性/价值 据作者所知,这是第一篇记录市场对宣布破产保护的非对称反应的论文,表明在某些情况下,管理者可以通过申请战略性破产来增加价值。
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来源期刊
CiteScore
6.00
自引率
7.70%
发文量
71
期刊介绍: Management Research Review publishes a wide variety of articles outlining the latest management research. We emphasize management implication from multiple disciplines. We welcome high quality empirical and theoretical studies, literature reviews, and articles with important tactical implications. Published 12 times a year, the journal prides itself on quick publication of the very latest research in general management. The key issues featured include: Business Ethics and Sustainability Corporate Finance Entrepreneurship and Small Business Management Industrial Relations Information and Knowledge Management International Business Human Resource Management Organizational Theory and Behaviour Production and Operations Management Strategic Management and Leadership
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