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Trading activity around chapter 11 filing
Institution:1. Birmingham Business School, University of Birmingham, Edgbaston, Birmingham B15 2TY, United Kingdom;2. School of Management and Economics, Cyprus University of Technology, Lemesos 3036, Cyprus;1. School of Economics and Management, Southwest Jiaotong University, Chengdu, China;2. Service Science and Innovation Key Laboratory of Sichuan Province, China;1. University of Minho, School of Economics and Management & NIPE (Centre for Research in Economics and Management), Campus de Gualtar, 4710-057 Braga, Portugal;2. NIPE (Centre for Research in Economics and Management), University of Minho, Campus de Gualtar, 4710-057 Braga, Portugal;1. Adam Smith Business School, University of Glasgow, Glasgow, UK;2. Essex Business School, University of Essex, Colchester, UK;1. School of Management, Xi''an Jiaotong University, No. 28 Xianning Road, Xi''an, Shaanxi 710049, China;2. School of Management, Huazhong University of Science and Technology, Luoyu Road 1037, Wuhan, Hubei 430074, China;1. Excelia Group, Excelia Business School, CERIIM, 102 Rue de Coureilles, 17024 La Rochelle, France;2. University Paris-Saclay, UMI SOURCE, UVSQ, IRD, France and Paris School of Business, PSB, 59 Rue Nationale, 75013 Paris, France;3. Rabat Business School, International University of Rabat, Rabat 11103, Morocco;4. Audencia Business School (AACSB, EQUIS, AMBA), France
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.
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