Does the Medium Matter? The Relations among Bankruptcy Petition Filings, Broadtape Disclosure, and the Timing of Price Reactions

Authors

  • Mark C. Dawkins,

    1. Terry College of Business, University of Georgia
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  • Linda Smith Bamber

    1. Terry College of Business, University of Georgia
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    • Terry College of Business, University of Georgia. We thank Thomas F. Schaefer, Pamela. Peterson, Kenneth Lorek, and Susan Pourciau for their assistance with the first author's dissertation, which provided the initial impetus for this paper. We also thank an anonymous reviewer, Michael Bamber, Marc Lipson, Jeffry Netter, Annette Poulsen, René Stulz, and seminar participants at Florida State University and the University of Georgia for their helpful comments, especially Susan Cheon and Ken Gaver. Special thanks are due Neil Bhattacharya for programming assistance with the ISSM database. We are indebted to John Cole at Florida Agricultural & Mechanical University for comments and ideas that helped frame the questions addressed in this study. We also gratefully acknowledge the financial support of the Deloitte & Touche Foundation, the KPMG Peat Marwick Foundation, and the Terry College of Business at the University of Georgia.


ABSTRACT

Drawing on a comprehensive sample of 330 bankruptcy petition filings from 1980 to 1993, we find that most of the market reaction does not occur on the bankruptcy petition filing date when the information becomes publicly available. Rather, most of the reaction occurs when news of the bankruptcy filing is more widely disseminated via the Broadtape. This “Broadtape announcement effect” persists after controlling for firm size, exchange listing, and predisclosure information. These are primarily timing differences since abnormal returns cumulated over an 11–day window centered on the filing date do not differ significantly across Broadtape disclosure date classifications.

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