Bankruptcy is a negative event that not only affects the company in question but all stakeholders of society. Our research will focus on one stakeholder group, business competitors. How are competitors affected by bankruptcy announcements? Past research has tried to answer this question in different ways. Some compared two industries with different characteristics while others worked with multiple industries. Past researchers suggested and tested three independent variables that they thought influence the returns of competitors in the face of bankruptcy: leverage, size and industry concentration. We adopt a different perspective when researching this topic in that we focus on competitors that are close to the bankrupt firm (business competitors) as opposed to using all competitors in an industry. The purpose of our research is to investigate if a chapter 11 bankruptcy announcement has an influence on business competitors within the same economic sector during the time horizon 2004-2012. In order to explore this topic, we incorporate three independent variables: economic sector concentration, firm leverage and firm size, to study if different characteristics of different economic sectors and firms would affect the bankruptcy announcement effect. Based on the quantitative method, our research utilized secondary data to study the relationships between the three independent variables and bankruptcy announcement effect on competitors. We found that the best way to carry out this research is by using a deductive approach and quantitative method. The results of our research showed weak correlations between the three variables and the bankruptcy announcement effect, among which the concentration was the most determinant variable and size has the weakest effect. For both concentration and firm size, we found inverse relationships between these two variables and abnormal returns of the business competitors. The abnormal returns earned by the high leveraged firms were less than the low leveraged ones. The conclusions of our research were that the chapter 11 bankruptcy announcement indeed influence the stock returns of business competitors. The firms in highly concentrated economic sectors had contagion effect while competitive effect happened to the firms in low concentrated ones. The same conclusion was drawn in terms of the firm size. For the leverage, there was no conclusion regarding the contagion or competitive effect as the results were inconclusive.