Contagion and competitive intra-industry effects of bankruptcy announcements An empirical analysis *

@inproceedings{Larry2001ContagionAC,
  title={Contagion and competitive intra-industry effects of bankruptcy announcements An empirical analysis *},
  author={Larry and Hans Peter Lang and Renl and M. Stulz},
  year={2001}
}
This paper investigates the effect of bankruptcy announcements on the equity value of the bankrupt firm’s competitors. On average, bankruptcy announcements decrease the value of a value-weighted portfolio of competitors by 1%. This negative effect is significantly larger for highly levered industries and industries where the unconditional stock returns of the nonbankrupt and bankrupt firms are highly correlated: the effect is significantly positive for highly concentrated industries with low… CONTINUE READING

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