{"title":"Bankruptcy as a planned business strategy? Evidence from the stock market","authors":"Luís Miguel Serra Coelho","doi":"10.1108/mrr-11-2022-0771","DOIUrl":null,"url":null,"abstract":"<h3>Purpose</h3>\n<p>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.</p><!--/ Abstract__block -->\n<h3>Design/methodology/approach</h3>\n<p>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.</p><!--/ Abstract__block -->\n<h3>Findings</h3>\n<p>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.</p><!--/ Abstract__block -->\n<h3>Originality/value</h3>\n<p>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.</p><!--/ Abstract__block -->","PeriodicalId":47769,"journal":{"name":"Management Research Review","volume":null,"pages":null},"PeriodicalIF":3.1000,"publicationDate":"2024-08-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Management Research Review","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.1108/mrr-11-2022-0771","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"MANAGEMENT","Score":null,"Total":0}
引用次数: 0
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.
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