اثرات سرایتی و رقابتی تایید طرح تجدید سازمان شده: شواهدی از بازار سهام تایوان

This paper aims to examine the intra-industry effects of confirmation of a reorganization plan. Using unique Taiwanese data on announcements of reorganization confirmation, I find evidence that such announcements elicit positive stock price reactions for the announcing firms and negative stock price reactions for other firms within the same industry. Specifically, negative competitive effects dominate positive contagion effects for industry rivals in the context of the announcement of a reorganization confirmation. Moreover, a hybrid neuro-fuzzy model is constructed, where five industry- and firm-level inputs are considered, to investigate which rivals enhance their position and which do not. Results show that my model is consistent and stable, and is good at classifying both contagion- and competitive-effect candidates.

In recent years, increasing importance has been attached to research into the intra-industry wealth effect of bankruptcy announcements in the accounting and finance field, and such research has consistently pointed to an association between the equity value of firms announcing information and that of non-announcing firms within the same industry. This association, known as the contagion and competitive effect or information transfer effect, has been documented in different contexts. Warner (1977) examines the contagion effects of bankruptcy announcements in the railroad industry, while Aharony and Swary (1983), Diamond and Dybvig (1983), and Gorton (1985) investigate the contagion in the banking industry brought about by the failure of an individual bank. According to the signaling hypothesis, investors use bankruptcy announcements by a firm to make inferences about its industry counterparts, since such announcements imply industry-wide cash flow problems and suggest that rival firms will be affected in the same manner as the announcing firm (contagion effects). That is, the worsening situation of the deteriorated factors could signal an adverse condition of the applicable industry as a whole, and, hence, investors may also expect downward prospects for other firms that operate in the same industry. Empirical studies by Lang and Stulz (1992) and Ferris et al. (1997), which focus on intra-industry stock price responses to Chapter 11 bankruptcy filings, and Cheng and McDonald (1996), which emphasize the stock price reactions to bankruptcy of surviving firms in the airline and railroad industries, support this hypothesis by stating that the announcements of bankruptcy filing have significantly negative implications not only for the announcing firm's investors, but for investors in industry-related firms. In addition to the contagion effect, past studies (e.g., Lang and Stulz, Lang and Stulz, 1992 and Haensly et al., 2001) have found that bankruptcy announcements may also evoke a competitive effect because they convey to the market place changes in the competitive position of firms in the industry. Specifically, given that some investors believe bankruptcy is due to events specific to the failing firm, e.g., fraud, such announcements strongly suggest the probability of complete exit from the market or the possibility of the eventual liquidation of the announcing firms. In such cases, non-announcing rivals in the industry are positively affected because a bankruptcy is an opportunity for them to improve profitability by increasing market share at the announcing firm's expense, and then the competitive effect would increase their share prices (Altman, 1984 and Titman, 1984). In a previous paper related to this topic, and focusing on the impact of a reorganization announcement on stock returns, Chi and Tang (2007)1 argue that news of the filing of a reorganization plan has significant negative price implications for the filer's stockholder wealth for two reasons. First, the filer will undergo a distressed restructuring, a process that Eberhart, Moore, and Roenfeldt (1990) report averages about two years. Second, the uncertainty about any court rulings for such a firm causes an information asymmetry problem which in turn leads to the firm's being undervalued. In addition, a bankrupt firm's direct and indirect costs increase while in Chapter 11 (Lang and Stulz, 1992). The former are costs that are directly associated with the legal bankruptcy process (e.g., attorneys' fees, accounting fees, etc.) while the latter are the costs of consequential losses (e.g., lost sales, interrupted operations, loss of valuable employees, etc.). It is well documented that a Chapter 11 filer continues bearing direct and indirect bankruptcy costs, thereby reducing its competitive position until the court approves its reorganization plan, allowing it to restructure and emerge from bankruptcy (Altman, 1984 and Weiss, 1990). This suggests that the filer's court-approved plan not only allows its exit from bankruptcy but also has a positive effect on the wealth of its shareholders. Similarly, Chi and Tang (2005) provide adherent evidence that the stockholders of firms announcing reorganization ratification and out-of-court settlement react positively to such announcements, while the stockholders of firms announcing filing dismissal react negatively.2 This positive wealth effects can be attributed to the fact that the court ratification of a reorganization plan resolves a major issue that has been clouding the filer's future and, thus, enables such a firm to concentrate all its efforts on increasing shareholder value. Although there have been many studies in various areas of intra-industry effects, none has examined such effects in the context of the confirmation of a reorganization plan. Since, on the one hand, the information of the court confirmation of a reorganization plan is more reliable than other information disseminated to the public; on the other hand, the contagion and competitive effects compose part of the market response to plan confirmation for rival firms, an empirical examination would indicate which effect is dominant. Positive correlations across stock returns of industry rivals would imply dominant contagion effects, whereas negative correlations would indicate competitive effects. In this paper, I use a unique Taiwanese dataset on announcements of reorganization confirmation to provide evidence on effects associated with the plan confirmation announcements of reorganization filings. The findings support my assertion that news of reorganization confirmations positively impacts on the equity value of the announcing firms. Furthermore, for other rivals in the same industry, my results indicate that competitive effects dominate contagion effects. A hybrid neuro-fuzzy model is constructed, where five industry- and firm-level inputs are considered, to investigate which rivals enhance their gains and which do not. The results show that my model is consistent and stable, and is good at classifying both contagion- and competitive-effect candidates. The remainder of the paper is organized as follows. In the next section, I offer a description of the data I use and of the methodology of my analysis. Section 3 presents the results of the empirical analysis. Section 4 concludes.

Using unique Taiwanese data on announcements of reorganization confirmation, I generate results which are consistent with my conjecture that such announcements signal positive information about the announcing firms, thus resulting in an increase in the equity value of the announcers; that is, investors revise the value of announcers because they anticipate that announcers will re-gain ground in the newly reshaped competitive landscape. I also find evidence that the stock price movement of portfolio rivals is adversely affected by plan confirmation news. Specifically, industry rivals experience significant negative effects from plan confirmation announcements, indicating that negative competitive effects dominate positive contagion effects for other firms in the industry. In addition to examining the cross-sectional differences in the magnitude of intra-industry co-movements, I further investigate which rivals enhance their position and which do not. This is in order to assist those investors who are interested in using announcements by one firm to make inferences about other firms that operate in the same industry, and who need a means of producing accurate predictions ahead of others in the market, so that tactical price returns can be gained. To do this, a hybrid neuro-fuzzy model is constructed where five industry- and firm-level inputs are considered. As for rivals' specific characteristics, my results show that positive reactions are stronger in highly leveraged industries and in those with similar stock return and cash flow characteristics. Moreover, I show that the stock price reactions of small rivals are greater than those of large ones. As to the discriminatory power and forecast performance of the neuro-fuzzy model, the results suggest that my model is consistent and stable and is good at classifying both contagion- and competitive-effect candidates.