Short-Term Price Reaction to Filing for Bankruptcy and Restructuring Proceedings—The Case of Poland
Abstract
:1. Introduction
- (1)
- How have share prices/rates of return reacted to the public disclosure of information on the initiation of bankruptcy and/or restructuring proceedings? Was this reaction quick or did it take time? A quick reaction of prices to this information may testify to market efficiency in a semi-strong form.
- (2)
- Based on the analyses carried out, is there the so-called reversal effect?
- (3)
- Are there any differences between abnormal return rates in the case of companies that have entered bankruptcy and restructuring proceedings? As information about the initiation of restructuring proceedings is considered less negative, we expect that the negative effect will be weaker than in the case of bankruptcy proceedings.
- (4)
- Are there any differences in share price reaction to information on bankruptcy or restructuring between the companies listed on more and less liquid markets (Warsaw Stock Exchange—WSE and NewConnect, respectively)?
2. Theoretical Background
3. Research Methodology
- Ri,t—the rate of return for company “i” on day “t”,
- CPi,t—the closing price for company “i” on day “t”,
- CPi,t−1—the closing price for company “i” on day “t − 1”.
- Rm,t—the rate of return for the WIG or NewConnect index on day “t”,
- εi,t—the random component,
- αi, βi—the estimated market-based model parameters.
- AAR—average abnormal return,
- N—number of analysed events in each group (for example 33 for liquidation bankruptcy proceedings),
- CAR—cumulative abnormal return,
- t1—the beginning of the research window (in this study—always two days before the event),
- t2—the ending of the research window (in this study—always ten days after the event),
- CAAR—cumulative average abnormal return.
4. Research Results
5. Conclusions
Author Contributions
Funding
Conflicts of Interest
References
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2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | |
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Bankruptcy (liquidation) proceedings (business activities) | 793 | 576 | 377 | 348 | 572 | 538 | 616 | 711 | 703 | 701 | 650 | 530 | 537 | 558 | 574 |
Bankruptcy proceedings with the possibility to make an arrangement | n/a | n/a | 70 | 63 | 119 | 117 | 107 | 166 | 180 | 122 | 91 | 26 | 0 | 0 | 0 |
Restructuring proceedings | - | - | - | - | - | - | - | - | - | - | - | 204 | 348 | 417 | 445 |
Legal Form | Number of Bankruptcies and Restructurings |
---|---|
Limited liability company | 486 |
Sole proprietorship | 366 |
Join-stock company | 73 |
Limited partnership | 38 |
General partnership | 30 |
Cooperative | 14 |
Others | 12 |
Sum | 1019 |
CONTENT | Liquidation Bankruptcy Proceedings | Restructuring Proceedings | Total |
---|---|---|---|
Listed on the WSE | 23 | 46 | 69 |
Listed on NewConnect | 10 | 25 | 35 |
Total | 33 | 71 | 104 |
Testing Option | Rates Used | Test Methods Used | Source for the Test |
---|---|---|---|
(1) | AR, CAR | 1. T-test 2. Descriptive statistics | 1. Gurgul (2019). |
(2) & (3) | AAR, CAAR | 1. Corrado rank test (Rank Z).1 2. Generalized rank Z Test (Gen. rank Z). 3. Generalized rank T-Test (Gen. rank T). 4. Patell or Standardized Residual Test (Patell Z). 5. Kolari and Pynnönen adjusted Patell or Standardized Residual Test (Adj. Patell Z). | 1. Corrado and Zivney (1992). 2. and 3. Kolari and Pynnönen (2011). 4. Patell (1976). 5. Kolari and Pynnönen (2010). |
Mean | Median | Mode | Standard Deviation | Kurtosis | Skewness | Lower 1 | Higher 2 | |
---|---|---|---|---|---|---|---|---|
AR(−2) | −2.7% | −0.2% | 0.5% | 9.5% | 8.0 | −2.3 | 13 | 3 |
AR(−1) | −1.1% | 0.3% | −0.1% | 12.5% | 16.7 | −2.8 | 11 | 7 |
AR(0) | −14.0% | −5.2% | 2.1% | 20.9% | 5.1 | −1.9 | 39 | 1 |
AR(1) | −3.0% | 0.2% | 0.5% | 29.0% | 23.5 | 2.2 | 20 | 11 |
AR(2) | −0.6% | 0.0% | −1.1% | 11.5% | 6.3 | 0.4 | 10 | 8 |
AR(3) | −0.1% | 0.2% | 0.4% | 10.2% | 3.6 | 0.3 | 6 | 8 |
AR(4) | −0.9% | 0.1% | 5.0% | 11.0% | 2.7 | −0.4 | 9 | 11 |
AR(5) | −0.7% | 0.2% | 0.8% | 10.9% | 20.4 | −2.9 | 9 | 8 |
AR(6) | 1.0% | 0.4% | 0.0% | 10.3% | 27.3 | 3.9 | 5 | 7 |
AR(7) | 0.2% | 0.3% | 0.6% | 10.1% | 3.3 | 0.1 | 5 | 13 |
AR(8) | 0.4% | 0.2% | 1.4% | 8.2% | 3.7 | 0.8 | 6 | 8 |
AR(9) | 2.1% | 0.6% | 0.4% | 7.9% | 6.6 | 2.0 | 3 | 9 |
AR(10) | −1.1% | 0.2% | 0.5% | 10.7% | 41.1 | −5.1 | 3 | 6 |
CAR | −20.6% | −14.7% | Multi. | 45.6% | 5.0 | 0.1 | 27 | 5 |
Test | AAR(−2) | AAR(−1) | AAR(0) | AAR(1) | AAR(2) | AAR(3) | AAR(4) | AAR(5) | AAR(6) | AAR(7) | AAR(8) | AAR (9) | AAR (10) | |
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Restructuring | Patell Z | −3.20 (***) | −2.13 (**) | −21.3 (***) | 1.32 | 0.06 | −0.72 | −1.24 | −1.19 | 1.32 | 1.30 | −0.58 | 2.03 (**) | −1.89 (*) |
Rank Z | −1.45 | 0.32 | −5.60 (***) | −0.43 | −0.10 | −1.29 | −0.79 | 0.50 | 0.33 | 0.08 | −0.94 | 0.25 | −0.42 | |
Adj. Patell Z | −3.20 (***) | −2.13 (**) | −21.3 (***) | 1.32 | 0.05 | −0.72 | −1.24 | −1.19 | 1.32 | 1.30 | −0.58 | 2.03 (**) | −1.88 (*) | |
Gen. Rank Z | −2.16 (**) | −0.29 | −6.20 (***) | −1.48 | −1.21 | −1.91 (*) | −1.48 | −0.51 | −0.51 | −0.91 | −1.88 (*) | −0.43 | −1.19 | |
Gen. Rank T | −1.87 (*) | −0.25 | −5.38 (***) | −1.27 | −1.04 | −1.65 | −1.28 | −0.44 | −0.44 | −0.79 | −1.63 | −0.37 | −1.03 | |
Bankruptcy | Patell Z | −4.92 (***) | −0.25 | −13.5 (***) | −8.46 (***) | −0.44 | 1.85 (**) | 0.15 | −0.97 | 0.92 | 0.09 | 2.89 (**) | 5.29 (**) | −0.66 |
Rank Z | −1.22 | −0.39 | −3.81 (***) | −0.50 | −1.69 (*) | 0.17 | −0.11 | −0.86 | 0.71 | −0.12 | 1.23 | 1.76 (**) | −0.84 | |
Adj. Patell Z | −4.92 (***) | −0.25 | −13.5 (***) | −8.45 (***) | −0.43 | 1.85 (**) | 0.15 | −0.97 | 0.92 | 0.09 | 2.89 (**) | 5.28 (**) | −0.65 | |
Gen. Rank Z | −2.00 (**) | −0.51 | −4.18 (***) | −1.67 (*) | −1.67 (*) | −0.16 | −0.74 | −1.09 | 0.87 | −0.52 | 0.95 | 1.37 | −1.34 | |
Gen. Rank T | −1.79 (*) | −0.45 | −3.73 (***) | −1.49 | −1.49 | −0.14 | −0.66 | −0.97 | 0.77 | −0.47 | 0.85 | 1.22 | −1.19 |
Test | AAR(−2) | AAR(−1) | AAR(0) | AAR(1) | AAR(2) | AAR(3) | AAR(4) | AAR(5) | AAR(6) | AAR(7) | AAR(8) | AAR(9) | AAR(10) | |
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
MM | Patell Z | −5.19 (***) | −2.52 (**) | −23.9 (***) | −1.22 | −0.06 | 0.60 | −0.66 | −0.38 | 0.23 | 2.89 (***) | 1.85 (*) | 4.50 (***) | 0.09 |
Rank Z | −2.18 (**) | −0.19 | −5.99 (***) | −0.25 | −0.84 | −0.88 | −0.56 | −0.09 | −0.10 | 0.47 | 0.06 | 0.96 | −0.45 | |
Adj. Patell Z | −5.18 (***) | −2.51 (**) | −23.8 (***) | −1.22 | −0.06 | 0.60 | −0.66 | −0.38 | 0.23 | 2.88 (***) | 1.84 (*) | 4.49 (***) | 0.09 | |
Gen. Rank Z | −2.71 (***) | −0.42 | −6.55 (***) | −0.9 | −1.42 | −1.42 | −1.16 | −0.73 | −0.58 | 0.13 | −0.18 | 0.72 | −0.9 | |
Gen. Rank T | −2.36 (**) | −0.37 | −5.72 (***) | −0.78 | −1.24 | −1.24 | −1.01 | −0.64 | −0.51 | 0.12 | −0.16 | 0.63 | −0.79 | |
NC | Patell Z | −2.04 (**) | 0.26 | −10.0 (***) | −4.62 (***) | −0.27 | −0.08 | −0.68 | −2.10 (**) | 2.44 (**) | −2.12 (**) | −0.61 | 1.7 (*) | −3.45 (***) |
Rank Z | 0.01 | 0.47 | −3.36 (***) | −0.88 | −0.56 | −0.52 | −0.50 | 0.08 | 1.55 | −0.84 | −0.39 | 0.67 | −0.88 | |
Adj. Patell Z | −2.05 (**) | 0.26 | −10.0 (***) | −4.62 (***) | −0.27 | −0.08 | −0.68 | −2.11 (**) | 2.44 (**) | −2.12 (**) | −0.61 | 1.70 (*) | −3.45 (***) | |
Gen. Rank Z | −1.02 | −0.10 | −3.64 (***) | −2.29 (**) | −1.40 | −0.92 | −1.24 | −0.86 | −0.20 | −2.01 (**) | −0.28 | 0.67 | −1.98 (**) | |
Gen. Rank T | −1.01 | −0.11 | −3.60 (***) | −2.26 (**) | −1.38 | −0.91 | −1.23 | −0.85 | −0.2 | −1.98 (*) | −0.27 | 0.66 | −1.96 (*) |
Grouping Variable | CAAR Value | Number of CARs Considered | Patell Z | Rank Z | Adj. Patell Z | Gen. Rank Z | Gen. Rank T |
---|---|---|---|---|---|---|---|
RESTRUCTURING | −17.0% | 71 | −7.278 (***) | −2.65 (***) | −6.513 (***) | −4.049 (***) | −4.669 (***) |
BANKRUPTCY | −28.5% | 33 | −5.006 (***) | −1.569 | −4.551 (***) | −2.435 (**) | −2.726 (***) |
MM | −19.1% | 69 | −6.579 (***) | −2.783 (***) | −6.179 (***) | −3.883 (***) | −4.443 (***) |
NC | −23.6% | 35 | −5.989 (***) | −1.425 | −5.86 (***) | −2.853 (***) | −2.889 (***) |
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Prusak, B.; Potrykus, M. Short-Term Price Reaction to Filing for Bankruptcy and Restructuring Proceedings—The Case of Poland. Risks 2021, 9, 56. https://doi.org/10.3390/risks9030056
Prusak B, Potrykus M. Short-Term Price Reaction to Filing for Bankruptcy and Restructuring Proceedings—The Case of Poland. Risks. 2021; 9(3):56. https://doi.org/10.3390/risks9030056
Chicago/Turabian StylePrusak, Błażej, and Marcin Potrykus. 2021. "Short-Term Price Reaction to Filing for Bankruptcy and Restructuring Proceedings—The Case of Poland" Risks 9, no. 3: 56. https://doi.org/10.3390/risks9030056