This paper asks whether the stocks of bankrupt firms are correctly priced, and explores who trades the stocks of these firms, and why. Our sample consists of firms that enter into Chapter 11 and remain listed on the NYSE, AMEX, and NASDAQ post-filing. We show that these stocks are heavily traded...

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...

This paper examines whether going concern audit opinions (GCO) affect the stock price performance of the announcing firms and their industry rivals. Our original evidence clearly suggests that such accounting event is asymmetrically perceived by the market depending on whether the firm is...

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,...