What Do Institutional Investors Know and Act on Before Almost Everyone Else: Evidence from Corporate Bankruptcies
Year: 2015
Type: article
Abstract: We analyze investment behavior of institutional managers who hold and trade shares of firms that file for bankruptcy. We find that during the five-year period preceding a bankruptcy filing, institutional investors (except those managing investment companies) are net buyers with a positive abnormal net number of shares traded during the period. Institutional managers start to sell shares of bankrupt firms sooner in some firms than in others; these earlier sales are of smaller firms with weaker operating performance, and lower equity risk. We do not find evidence that institutional stockholders trade strategically and avoid material price declines before they occur.
Authors: Precourt, Elena, Oppenheimer, Henry
Institutions: Bryant University, University of Rhode Island
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2909932818