The Effect of European Bankruptcy Announcements on Competitors

The financial crisis resulted in more companies filing for bankruptcy. What does this mean for the stock price of competitors? Are there factors influencing the stock price reaction of competitors on bankruptcy announcements in Europe? Is there even an effect present? Do financial markets in different European countries react on bankruptcy announcements in another country? Does the economic stability of the world or a specific country influence the stock price reaction of competitors in other countries after a bankruptcy announcement? Does the currency of a country affect its reaction on a bankruptcy announcement? This study argues that the level of leverage, the degree of competition, the state of the economy and the country of incorporation of the filing firm all have an effect on the stock price reaction of competitors after a bankruptcy announcement.