Standard and Poor's began publication of Credit Watch in November of 1981 as an early warning list for firms whose debt is under review for a possible rating change. This dissertation is composed of three essays which address various aspects of Credit Watch and the impact on shareholder wealth. The first essay uses a discriminant analysis model to classify the Credit Watch status of firms which engaged in mergers and acquisitions activity in 1991. The model correctly classifies 69.85% of the in-sample firms and 65.83% of the out of sample firms. The second essay examines whether the stock market reacts more strongly to trigger events which cause Credit Watch placements than to the actual placement. Significantly larger negative abnormal return are found around the trigger event than the placement. No evidence is found for the differential reaction evolving over time. The third essay examines firm specific and economy-wide factors which may be related to the strength of the abnormal stock return around the Credit Watch removal date. The removal return is found to be positively related to the number of trading days a firm remains on Credit Watch, negatively related to the number of updates regarding the firm released by …

This dissertation consists of three essays exploring market reactions to business failure. In the first essay, the filing strategies are divided into three basic types, voluntary, involuntary and prepackaged. The second essay provides insight into industry wide factors impacting assimilation of information by the market. The third essay provides a view of the GARCH-M model in measuring a risk premium as a firm approaches bankruptcy.