Market reactions to bankruptcy filing disclosures and their relation to financial distress indicators

Prior research on market reactions to bankruptcy filings has treated bankrupt firms as a uniform group with respect to the timing and manner of the bankruptcy filing disclosure. This view is limiting because important differences exist in the timing and manner of bankruptcy filing disclosure. For example, some firms never experience disclosure of their filing via the Wall Street Journal (WSJ) (absent disclosure firms). Other firms experience immediate disclosure of their filing in the WSJ (immediate disclosure firms), while the remaining firms experience a delay in disclosure of their filing (delayed disclosure firms). This study partitions firms into the three groups to investigate market reactions to bankruptcy filings and their relation to financial distress indicators.; Research question one assesses when the reach group's bankruptcy filings have information content, whether differences exist in the information content of each group's bankruptcy filings, and whether a directional relationship exists between groups with respect to the information content of their bankruptcy filings. Research question two assesses the strength of the relationship between market reactions to bankruptcy filings and the richness of firms' predisclosure information environment by examining the relationship between market reactions and WSJ attention measures. Research question three assesses whether a relationship exists between auditors' issuing or failing to issue going-concern modifications, subsequent bankruptcy filings, and the resulting market reactions for absent disclosure, immediate disclosure, and delayed disclosure firms.; Results for research question one indicate that bankruptcy filings appear to have information content, that the information content of the bankruptcy filings differs across groups, and that a directional relationship exists between groups with respect to the information content of their bankruptcy filings. Results for research question two indicate that an inverse relationship exists between abnormal price reactions to bankruptcy filings and WSJ attention measures, whereas a direct relationship exists between abnormal volume reactions to bankruptcy filings and WSJ attention measures. Results for research question three support the existence of a relationship between auditors' issuing or failing to issue going-concern modifications, subsequent bankruptcy filings, and the resulting abnormal volume reactions for absent disclosure and delayed disclosure firms.