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- Title
Investing in Bankrupt Firms.
- Authors
MORSE, DALE; SHAW, WAYNE
- Abstract
We examine the investment characteristics of firms electing to enter bankruptcy, between 1973 and 1982. Comparisons are made before and after the Bankruptcy Reform Act of 1978. Our results indicate that the 1978 Act had no significant impact on bankruptcy decisions or resolutions for actively traded firms. Trading in bankrupt firms' securities is becoming more common, but no abnormal returns appear to be available. Systematic risk does not change significantly with the filing of bankruptcy, but there is a significant increase in return variance. The financial markets also react to various announcements of stages in the reorganization process.
- Subjects
UNITED States; BANKRUPTCY; CORPORATE reorganizations; BUSINESS finance; CHANGE management; INVESTMENT management; AMERICAN business enterprises; FINANCIAL markets; FINANCIAL crises; LIQUIDATION; CORPORATE divestiture; RISK management in business; ECONOMICS; MANAGEMENT
- Publication
Journal of Finance (Wiley-Blackwell), 1988, Vol 43, Issue 5, p1193
- ISSN
0022-1082
- Publication type
Article
- DOI
10.1111/j.1540-6261.1988.tb03964.x