The Equity Performance of Companies that Emerge from Chapter 11 Bankruptcy Post Year 2000

Open Access
Author:
Lucente, Alec Vincent
Area of Honors:
Finance
Degree:
Bachelor of Science
Document Type:
Thesis
Thesis Supervisors:
  • Louis Gattis Jr., Thesis Supervisor
  • Brian Spangler Davis, Honors Advisor
  • Joseph Randall Woolridge, Faculty Reader
Keywords:
  • bankruptcy
  • chapter 11
  • stock performance
Abstract:
The study focuses on determining if companies that emerge from chapter 11 bankruptcy witness positive abnormal returns after they emerge from bankruptcy. The study examines 60 companies that emerge from chapter 11 bankruptcy after 2000 and uses the market model and CAPM to determine expected returns. The paper also aims to find the nominal relative performance, as of 12/31/2014, of emerging companies against the S&P 500 and its respective industry. The study found that companies that emerged from chapter 11 bankruptcy witnessed cumulative negative abnormal returns when using CAPM and the market model 250 days after emerging from bankruptcy. The study also found that total median and average nominal relative performance of the firms were negative compared to the S&P 500 and their respective sectors.