Saddled with Attention: Overreaction to Bankruptcy Filings

33 Pages Posted: 26 May 2020

See all articles by Tomas Reyes

Tomas Reyes

Pontifical Catholic University of Chile

Nicolas Waissbluth

Pontifical Catholic University of Chile

Date Written: December 2019

Abstract

We analyze the effect of investor attention on stock prices around Chapter 11 bankruptcy filings. We measure investor attention as abnormal search volume from Google, and find that attention‐grabbing companies have more negative abnormal stock returns in the days before and during bankruptcy filings and more positive abnormal returns immediately thereafter. That is, for companies receiving high attention, investors overreact to a bankruptcy filing; for companies receiving low attention, they underreact. This pattern is more pronounced for companies with low institutional ownership and holds after controlling for standard predictors of stock performance during bankruptcy.

Suggested Citation

Reyes, Tomas and Waissbluth, Nicolas, Saddled with Attention: Overreaction to Bankruptcy Filings (December 2019). International Review of Finance, Vol. 19, Issue 4, pp. 787-819, 2019, Available at SSRN: https://ssrn.com/abstract=3603501 or http://dx.doi.org/10.1111/irfi.12199

Tomas Reyes (Contact Author)

Pontifical Catholic University of Chile ( email )

Vicuna Mackenna 4860
Santiago, RM 7820436
Chile

HOME PAGE: http://www.uc.cl

Nicolas Waissbluth

Pontifical Catholic University of Chile ( email )

Av Libertador General Bernardo O'Higgins 340
Santiago, Región Metropolitana 8331150
Chile

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