Tension in Financial Reporting: Reacting to a Peer Bankruptcy Announcement
Mahmoud Delshadi,
Ahmad Hammami,
Michel Magnan
Abstract:We investigate if and how a peer’s bankruptcy affects financial reporting by other firms within the industry. Prior research documents that the bankruptcy filing of a peer firm has negative capital market effects on other firms within the industry (lower stock market value and higher cost of debt). We argue that firms within an industry experiencing peer bankruptcies modify their financial reporting to mitigate such negative capital market effects. However, tension arises as to whether such modification is tow… Show more
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