This paper explores the market response to two apparently similar but in fact very different firm-specific bad-news events: 1) filing a strategic Chapter 11, and 2) filing a financially-motivated Chapter 11. We find that the market is unable to distinguish between the two in both the pre-event,...

In 2005, the U.S. Bankruptcy Law suffered major adjustments with the passing of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA). In this paper, I explore the market pricing implications of this change. There is evidence that, in the pre-bankruptcy period, the risk-adjusted...

This paper tests to what extent the Hong and Stein (1999) model explains the stock price performance of firms filing for Chapter 11 bankruptcy. In line with the model's main prediction, I find that the market severely misprices (correctly prices) the bankrupt firms for which information is...