Journal ArticleDOI
Financial ratios and the probabilistic prediction of bankruptcy
TLDR
In this paper, the authors present some empirical results of a study predicting corporate failure as evidenced by the event of bankruptcy, and the methodology is one of maximum likelihood estimation of the so-called conditional logit model, in which the data set used in this study is from the seventies (1970-76).Abstract:
This paper presents some empirical results of a study predicting corporate failure as evidenced by the event of bankruptcy. There have been a fair number of previous studies in this field of research; the more notable published contributions are Beaver [1966; 1968a; 1968b], Altman [1968; 1973], Altman and Lorris [1976], Altman and McGough [1974], Altman, Haldeman, and Narayanan [1977], Deakin [1972], Libby [1975], Blum [1974], Edmister [1972], Wilcox [1973], Moyer [1977], and Lev [1971]. Two unpublished papers by White and Turnbull [1975a; 1975b] and a paper by Santomero and Vinso [1977] are of particular interest as they appear to be the first studies which logically and systematically develop probabilistic estimates of failure. The present study is similar to the latter studies, in that the methodology is one of maximum likelihood estimation of the so-called conditional logit model. The data set used in this study is from the seventies (1970-76). I know of only three corporate failure research studies which have examined data from this period. One is a limited study by Altman and McGough [1974] in which only failed firms were drawn from the period 1970-73 and only one type of classification error (misclassification of failed firms) was analyzed. Moyer [1977] considered the period 1965-75, but the sample of bankrupt firms was unusually small (twenty-seven firms). Theread more
Citations
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Methodological issues related to the estimation of financial distress prediction models
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Larger board size and decreasing firm value in small firms1
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Forecasting Bankruptcy More Accurately: A Simple Hazard Model
TL;DR: In this paper, the authors argue that hazard models are more appropriate than single-period models for forecasting bankruptcy and propose a model that uses both accounting ratios and market-driven variables to produce out-of-sample forecasts.
Journal ArticleDOI
Forecasting Bankruptcy More Accurately: A Simple Hazard Model
TL;DR: In this paper, the authors argue that hazard models are more appropriate for forecasting bankruptcy than the single-period models used previously, and they propose a model that uses a combination of accounting ratios and market-driven variables to produce more accurate out-of-sample forecasts than alternative models.
References
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Journal ArticleDOI
Financial ratios, discriminant analysis and the prediction of corporate bankruptcy
TL;DR: In this paper, a set of financial and economic ratios are investigated in a bankruptcy prediction context wherein a multiple discriminant statistical methodology is employed, and the data used in the study are limited to manufacturing corporations, where an initial sample of sixty-six firms is utilized to establish a function which best discriminates between companies in two mutually exclusive groups: bankrupt and nonbankrupt firms.
Journal ArticleDOI
Financial Ratios As Predictors Of Failure
TL;DR: In this article, the authors focus on the use of ratios as predictors of failure, defined as the inability of a firm to pay its financial obligations as they mature, and demonstrate that a firm is said to have failed when any of the following events have occurred.
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ZETATM analysis A new model to identify bankruptcy risk of corporations
TL;DR: In this paper, the authors explored the development of a bankruptcy classification model which incorporates comprehensive inputs with respect to discriminant analysis and utilizes a sample of bankrupt firms essentially covering the period 1969-1975.