Investor Attention Around Corporate Restructurings

ABSTRACT We investigate investor behavior and firm performance related to corporate restructuring announcements using a database of Securities and Exchange Commission (SEC) filings by US firms and web traffic on the SEC's website. We find that abnormal investor attention positively predicts restructuring announcements for up to 3 months prior to the announcement and attention stays elevated for at least 12 months afterward. This is true for the attention of both retail investors and mutual funds. We also find that abnormal attention from both retail investors and mutual funds prior to a restructuring announcement is positively related to long‐run abnormal returns to the firm, suggesting that some retail investors exhibit a high degree of sophistication and are not simply noise traders. Our results are consistent with investors focusing their limited attention on restructuring plans with the highest probability of restructuring success.