In this paper, we examine the behavior of stock prices of individual firms with different bond ratings surrounding the October market crash of 1987 and therefrom make inferences about the significance of bankruptcy costs borne by stockholders. The key findings are as follows: Immediately...

Investors are known to exhibit home (local) bias even when they invest in their domestic markets. Since home bias is symptomatic of market segmentation, the ‘home bias at home' phenomenon raises an important question: How well integrated are domestic financial markets? The answer for this...