The Competitors’ Response to a Bankruptcy Filing Announcement Made by a Stock-Listed Company Depending on Sector Characteristics

• Authors: Olga Krzeczewska
• Languages of publication: EN

Abstracts

EN

The main aim of the article is to determine how the bankruptcy filing announcement of a stock listed company affects the market valuation of its competitors, depending on sector characteristics. An event study was conducted on the example of returns to shares of companies comprised in the WIG index and operating in 9 sectors. It is indicated that the bankruptcy filing announcement is quickly (within one day) incorporated into the share prices of competitors of the announcing firm. It is confirmed that the direction of market reaction toward share prices of competitors is differentiated by the characteristics of the sector. Averaged results show that the competitive effect occurs in the sectors with a high level of concentration, while the contagion effect is noted in sectors with low concentration. Companies from sectors characterized by low leverage experience the competitive effect. No information transfer was found for a group of companies in sectors characterized by high leverage.

PL

The main aim of the article is to determine how the bankruptcy filing announcement of a stock listed company affects the market valuation of its competitors, depending on the sector characteristic. An event study was conducted on the example of returns to shares of companies comprised in the WIG index and operating in 9 sectors. It is indicated that the bankruptcy filing announcement is quickly (within one day) incorporated into the share prices of competitors of the announcing firm. It is confirmed that the direction of market reaction toward share prices of competitors is differentiated by the characteristics of the sector. Averaged results show that the competitive effect occurs in the sectors with a high level of concentration, while the contagion effect is noted in sectors with low concentration. Companies from sectors characterized by low leverage experience the competitive effect. No information transfer was found for a group of companies in sectors characterized by high leverage.

Keywords

EN

contagion effect; competitive effect; information transfer; bankruptcy filing; event study

PL

contagion effect; competitive effect; information transfer; bankruptcy filing; event study

• Publisher: Wydawnictwo Uniwersytetu Marii Curie-Skłodowskiej
• Journal: Annales Universitatis Mariae Curie-Skłodowska, sectio H – Oeconomia
• Year: 2021
• Volume: 55
• Issue: 1

Dates

published

2021

online

2021-05-11

Contributors

author

Olga Krzeczewska

References

• Brown, S. J., Warner, J. B. (1980). Measuring security price performance. Journal of financial economics, 8(3), 205-258. doi: 10.1016/0304-405X(80)90002-1
• Brown, S. J., Warner, J. B. (1985). Using daily stock returns. The case of event studies. Journal of Financial Economics, 14(1), 3-31. doi: 10.1016/0304-405X(85)90042-X
• Goins, S., Gruca, T. S. (2008). Understanding Competitive and Contagion Effects of Layoff Announcements. Corporate Reputation Review, 11(1), 12–34. doi:10.1057/crr.2008.3
• Gurgul, H. (2012). Analiza zdarzeń na rynkach akcji: wpływ informacji na ceny papierów wartościowych (II). Warszawa: Oficyna a Wolters Kluwer Business.
• Haensly, P., Theis, J. & Swanson, Z. (2001). Reassessment of Contagion and Competitive Intra-Industry Effects of Bankruptcy Announcements. Quarterly Journal of Business and Economics, 45-63. doi:10.2307/40473333
• Hertzel, M. G., Li, Z., Officer, M. S.& Rodgers, K. J. (2008). Inter-firm linkages and the wealth effects of financial distress along the supply chain. Journal of Financial Economics, 87(2), 374–387. doi:10.1016/j.jfineco.2007.01.005
• Iqbal, Z. (2002). The effects of bankruptcy filings on the competitors’ earnings. International Review of Economics and Finance, 11(1), 85–99. doi:10.1016/S1059-0560(01)00089-2
• Jorion, P., Zhang, G. (2007). Good and bad credit contagion: Evidence from credit default swaps. Journal of Financial Economics, 84(3), 860–883. doi:10.1016/j.jfineco.2006.06.001
• Kwiatkowska, E. (2013). Mierzalne kryteria oceny konkurencyjności rynków telekomunikacyjnych. Aspekty praktyczne. Internetowy Kwartalnik Antymonopolowy i Regulacyjny, 2(8), 74-87.
• Krzeczewska, O., & Pastusiak, R. (2020). Does bankruptcy filing always mean contagion? Evidence from industry rivals. International Journal of Finance & Economics. doi:10.1002/ijfe.2219
• Lang, L. H. P., & Stulz, R. M. (1992). Contagion and competitive intra-industry effects of bankruptcy announcements. An empirical analysis. Journal of Financial Economics, 32(1), 45–60. doi:10.1016/0304-405X(92)90024-R
• Perepeczo, A. (2011). Analiza zdarzenia i jej zastosowania. Zeszyty Naukowe Uniwersytetu Szczecińskiego Finanse, Rynki Finansowe, Ubezpieczenia, (33), 35-51.
• Portal Giełdy Papierów Wartościowych w Warszawie. (2020). Retrieved from www.gpw.pl
• Portal Stooq.pl. (2020). Retrieved from www.stooq.pl
• Schipper, K. (1990). Commentary on information transfers. Accounting Horizons, 4(4), 97–107.
• Serwis Ekonomiczny Polskiej Agencji Prasowej. (2020). Retrieved from www.biznes.pap.pl
• Ustawa z dnia 15 maja 2015 r. – Prawo restrukturyzacyjne, Dz.U. 2015 poz. 978 (The Act of 15 May 2015 – Restructuring Law, Journal of Laws of 2015 item 978).

Identifiers

DOI

10.17951/h.2021.55.1.31-40