Trading activity around chapter 11 filing
Journal
International Review of Financial Analysis
Date Issued
July 1, 2022
DOI
10.1016/j.irfa.2022.102130
Abstract
This paper uses institutional ownership data and order flow information to document and explain equity trading patterns prior to chapter 11 bankruptcy filing.We provide a model that predicts trading activity prior to filing which results from a difference of opinion amongst different types of investors about whether the firm should be liquidated. We then test trading data to show that trading activity is elevated around chapter 11 filing as the model predicts. We show how institutional holdings change around filing and that chapter 7 firms appear relatively more attractive to institutional investors than emerging firms around filing.