Abstract
According to the American bankruptcy code, Chapter 11 provides firms chance to reorganize their financial structure within 120 days under protection. Previous studies have shown the contagion and the competitive effects on rivals when firms filing Chapter 11, measured by Credit Default Swap market. In the first stage, we would like to extend to the following events. After the protection of Chapter 11, about 80% of firms can emerge from bankruptcy and continue to run the business. To provide stronger evidences, we construct a rivals’ portfolio of Credit Default Swap market and use the cumulated change of spread to detect the intra-industry effects and find significant contagion effect on rivals who have higher rating. In the next stage, we continue our study when the firms file the protection of Chapter 11 again. To compare with the previous filing, we assess the Credit Default Swap spread of the intra-industry portfolios around the refiling date. And the results show that once the firms refile,it contains positive information for rivals and the competitive effect will dominate.