The Solar Shakeout - Capital Market Reactions to Bankruptcy Announcements in the German Solar Industry
54 Pages Posted: 27 Dec 2015 Last revised: 10 Apr 2016
Date Written: April 3, 2016
This paper investigates how bankruptcy announcements in the German solar industry affect the stock market returns of announcing firms and their competitors. We show that German solar firms experience negative capital market reactions to their own bankruptcy announcements and to the announcements of their competitors. Cross-sectional analysis reveals that these negative information externalities are magnified by higher leverage. Further analysis also indicates that these negative information externalities are valuable predictors in short-term default probability models.
Keywords: Bankruptcy Announcements, Spillover Effects, Negative Information Externalities, Competition Effects, Event Study, Photovoltaic Industry, Solar Industry
JEL Classification: G14, G33, Q42
Suggested Citation: Suggested Citation