Finance | Corporate Finance | New Equity Performance Following Chapter 11 Emergence

Journal of Business & Economics Research – August 2007 Volume 5, Number 8 91 New Equity Performance Following Chapter 11 Emergence Nicholas K. Wold, Colorado College Judith A. Laux, (E-mail: jlaux@coloradocollege. edu), Colorado College ABSTRACT... More

Journal of Business & Economics Research – August 2007 Volume 5, Number 8 91 New Equity Performance Following Chapter 11 Emergence Nicholas K. Wold, Colorado College Judith A. Laux, (E-mail: jlaux@coloradocollege. edu), Colorado College ABSTRACT This body of research investigates how the performance of exchange-traded common equity from firms in Chapter 11 bankruptcy emergence compares with common stock from non-bankrupt competitors and recently public peers in short and long-term time horizons. Return data are gathered for a sample of sixteen financially restructured companies, each paired with two nondistressed industry competitors and one recently-public peer. Using the Capital Asset Pricing Model as a primary analytical tool, empirical tests show a positive correlation in equity returns among the samples of restructured and non-distressed market competitors and a stock underperformance from the sample of IPO competitors. These results suggest that markets ar Less