Market Behavior of Institutional Investors around Bankruptcy Announcements

Alex Frino, Stewart Jones, Andrew Lepone*, Jin Boon Wong

*Corresponding author for this work

Research output: Contribution to journalArticle

10 Citations (Scopus)

Abstract

This paper examines, using proprietary ASX data containing institutional holdings, if institutional investors exit en mass prior to announcements of financial distress. Evidence indicates that while some institutional investors exit the stock, the withdrawal is gradual, commencing approximately 115 days prior to event. This is driven by active institutional investors reacting to the release of the financially distressed companies' last publicly released financial reports. There is no significant decline in institutional holdings before announcements; most institutional investors hold financially distressed shares through to failure. There is evidence that the lack of disclosure drives the increase in information asymmetry prior to company failure.

Original languageEnglish
Pages (from-to)270-295
Number of pages26
JournalJournal of Business Finance and Accounting
Volume41
Issue number1-2
DOIs
Publication statusPublished - Jan 2014

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