TY  - RPRT
A1  - Hackbarth, Dirk
A1  - Haselmann, Rainer
A1  - Schoenherr, David
T1  - Financial distress, stock returns, and the 1978 Bankruptcy Reform Act
N2  - We study the effect of weakening creditor rights on distress risk premia via a bankruptcy reform that shifts bargaining power in financial distress toward shareholders. We find that the reform reduces risk factor loadings and returns of distressed stocks. The effect is stronger for firms with lower firm-level shareholder bargaining power. An increase in credit spreads of riskier relative to safer firms, in particular for firms with lower firm-level shareholder bargaining power, confirms a shift in bargaining power from bondholders to shareholders. Out-of-sample tests reveal that a reversal of the reform's effects leads to a reversal of factor loadings and returns.
KW  - financial distress
KW  - law and finance
KW  - shareholder recovery
KW  - stock returns
Y1  - 2014
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/37085
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-370851
UR  - http://ssrn.com/abstract=1787627
N1  - The appendices for this paper are available at the following URL: http://ssrn.com/abstract=2517596
IS  - September 26, 2014
EP  - 47
ER  -