Market Behavior of Institutional Investorsaround Bankruptcy Announcements
This paper examines, using proprietary ASX data containing institutional holdings,if institutional investors exit en mass prior to announcements of financial distress. Evidenceindicates that while some institutional investors exit the stock, the withdrawal is gradual, com-mencing approximately 115 days prior to event. This is driven by active institutional investorsreacting to the release of the financially distressed companies' last publicly released financialreports. There is no significant decline in institutional holdings before announcements; mostinstitutional investors hold financially distressed shares through to failure. There is evidence thatthe lack of disclosure drives the increase in information asymmetry prior to company failure.