Firms under Judicial Protection: A Profitable Investment?

Abstract

The objective of this article is to observe stock prices of firms around their filing for liquidation or reorganization procedure. Through a methodology developed for this purpose, we compare the stock returns of these firms with that of “similar” companies but not affected by this type of event. The results report higher average market profitability for firms under protection of the American bankruptcy code for a holding period of between 1 and 5 months after the announcement date.