AbstractThis paper examines shareholder wealth responses to bankruptcy filing announcements between 1974 and 1989 to draw inferences about the impact of the adoption of the Bankruptcy Reform Act of 1978. The authors find that post‐Reform Act announcements are associated with more negative pre‐filing and announcement period returns to shareholders. Unlike prior research, this study finds that large firms and NYSE‐listed firms experience more negative returns. It also finds that the market can discriminate between firms that are ultimately worthless and those that may retain some value for shareho