Wall Street Journal Distress Disclosures and Bankruptcy Research‪.‬

ABSTRACT This study assesses the extent to which the Wall Street Journal (WSJ) is a useful and reliable source of distress disclosures for bankruptcy research. Prior accounting and finance studies document the importance of controlling for distress disclosures in bankruptcy research. These studies identify distress disclosures from numerous sources: 8-Ks, 10-Ks, NT10-Ks, LEXIS, annual reports, Moody's Industrial Manuals, the F&S Index of Corporate Changes, the Dow Jones News Service, and the WSJ. Some sources are costly (e.g., 8-Ks, 10-Ks, NT10-Ks, and the Dow Jones News Service), while other sources do not provide timely distress disclosures (e.g., LEXIS, annual reports, Moody's Industrial Manuals, and the F&S Index of Corporate Changes). This study focuses on the WSJ since it potentially represents a low-cost, timely, and widely-disseminated source of distress disclosure information. We first construct an aggregate WSJ distress disclosure measure, and find that this aggregate WSJ distress disclosure measure mitigates bankruptcy filing price reactions. We then examine WSJ reporting of six types of distress disclosures, and find that three types of WSJ distress disclosures mitigate bankruptcy filing price reactions: qualified audit opinions, technical defaults, and possible bankruptcy filings. The WSJ thus provides a useful and reliable source of distress disclosures for bankruptcy research.