Investor Attention Around Corporate Restructurings

Abstract

We investigate investor behavior and firm performance related to corporate restructuring announcements using a database of Security Exchange Commission (SEC) filings by U.S. firms and web traffic on the SEC’s website. We find that abnormal investor attention positively predicts restructuring announcements for up to three months prior to the announcement and attention stays elevated for at least twelve months afterwards. This is true for attention from both retail and non-retail sources. We also find that abnormal attention prior to a restructuring announcement is positively related to long-run abnormal returns to the restructuring firm, with non-retail abnormal attention being a stronger predictor of future performance than retail abnormal attention; these effects are amplified if the market’s return to the restructuring announcement was positive and are stronger if the integration cost of a firm’s information is low. Our results are consistent with investors focusing their limited attention on those with the highest probability of restructuring success.

Keywords: restructuring, corporate disclosures, EDGAR, monitoring, information costs

JEL Classification: G3, G11, G14, G34