Abstract
The aim of this paper is to apprehend the information uncertainty inherent to stocks of U.S. firms around their filing for reorganization procedure. To this end, a Generalized Auto-Regressive Conditional Heteroscedasticity (GARCH) model is proposed to analyze information uncertainty (volatility is used as a proxy) around the filing announcement for reorganization procedure (chapter 11) of 435 U.S. firms during the period 2000-2012. Our results show that the volatility of stock returns generally increases on and after the announcement date for bankruptcy procedure but also that shocks may be observed at different periods. This study may be of interest for investors considering distressed stocks as a potential element of diversification.
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