Financial Firm Bankruptcies, International Stock Markets and Investor Sentiment

International Journal of Finance and Economics, Vol. 24 (1), pp. 461-473, January 2019

32 Pages Posted: 5 Feb 2019 Last revised: 28 Feb 2020

See all articles by Panayiotis Papakyriakou

Panayiotis Papakyriakou

University of Southampton - Department of Banking and Finance

Athanasios Sakkas

Athens University of Economics and Business - Department of Accounting and Finance

Zenon Taoushianis

University of Southampton - Department of Banking and Finance

Date Written: September 1, 2018

Abstract

We consider bankruptcy announcements of large financial institutions in the US and examine their impact on an international sample of 66 stock market indices. Employing an event-study methodology, we find that stock markets exhibit strong adverse reaction in the aftermath of such announcements. Further, we develop a Surprise measure, based on the country-level investor sentiment, and find that stock markets in negatively surprised countries respond quickly, by sustaining significantly larger declines in the first three trading days following the announcements. Finally, we examine the reaction of stock markets, conditional on the economic classification of their home countries, and find that stock markets in developing (developed) economies are associated with substantially larger (smaller) economic losses.

Keywords: Bankruptcy Announcements, Financial Firms, International Stock Markets, Investor Sentiment, Economic Classification

JEL Classification: G14, G15, G33

Suggested Citation

Papakyriakou, Panayiotis and Sakkas, Athanasios and Taoushianis, Zenon, Financial Firm Bankruptcies, International Stock Markets and Investor Sentiment (September 1, 2018). International Journal of Finance and Economics, Vol. 24 (1), pp. 461-473, January 2019, Available at SSRN: https://ssrn.com/abstract=3247183

Panayiotis Papakyriakou (Contact Author)

University of Southampton - Department of Banking and Finance ( email )

Southampton
United Kingdom

Athanasios Sakkas

Athens University of Economics and Business - Department of Accounting and Finance ( email )

76 Patission Street
GR-104 34 Athens
Greece

Zenon Taoushianis

University of Southampton - Department of Banking and Finance ( email )

Southampton
United Kingdom

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
82
Abstract Views
979
Rank
446,839
PlumX Metrics