Effects of announcements of reorganization outcome

Abstract

Less is known about whether the market perceives the final resolution of post-reorganization filing to be idiosyncratic or to carry endemic implications for the corresponding industries. This study observes the presence of intra-industry information transfers; the magnitude and direction of the reactions in response to three separate resolution outcome differs in a systematic way across industry portfolios. Specifically, portfolio rivals that are affected by competitive realignments in the industry experience stock price reactions in the opposite manner to those of the distressed firms, thus suggesting dominant competitive effects. In addition, this study reveals that the discriminatory power and forecast performance of three hybrid neuro-fuzzy models are stable and unimpaired across time and are generally superior in classifying Rival Cumulative Prediction Error (RCPE ⁻) candidates.

Acknowledgements

I would like to thank the anonymous reviewers for their comments and suggestions, which have helped clarify the views presented here. Any errors which remain are, however, my responsibility.