Financial Statement Analysis and the Prediction of Financial Distress
Now Publishers Inc, 2011 - Business & Economics - 79 pages
Financial Statement Analysis and the Prediction of Financial Distress discusses the evolution of three main streams within the financial distress prediction literature: the set of dependent and explanatory variables used, the statistical methods of estimation, and the modeling of financial distress. Section 1 discusses concepts of financial distress. Section 2 discusses theories regarding the use of financial ratios as predictors of financial distress. Section 3 contains a brief review of the literature. Section 4 discusses the use of market price-based models of financial distress. Section 5 develops the statistical methods for empirical estimation of the probability of financial distress. Section 6 discusses the major empirical findings with respect to prediction of financial distress. Section 7 briefly summarizes some of the more relevant literature with respect to bond ratings. Section 8 presents some suggestions for future research and Section 9 presents concluding remarks.
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Concepts of Financial Distress
Theory of the Use of Financial Statement
The Use of Market ValueBased
Modeling the Probability of Bankruptcy
ability of financial accounting model accounting variables accounting-based variables bankrupt and non-bankrupt bankrupt firms bankruptcy models bankruptcy prediction based variables Beaver bond ratings book-to-market ratio bottom three deciles cash flow coefficients combined model conditional probability credit default swap Cumulative cumulative distribution function DACC debt discretionary accruals distress prediction distressed firm EBITDA estimation expected explanatory power financial ratios financial statement analysis hazard model hazard rate Hillegeist interest likelihood ratio loan loss firms loss ratio market capitalization market model market value market variables market-based model market-based variables measure misclassifying mix of information NASDAQ non-bankrupt firms odds ratio Ohlson opportunity cost out-of-sample Panel partition positive BTM posterior probabilities potential predict financial distress predictive ability predictive power prior probabilities prior research prior to bankruptcy probability of bankruptcy probability of financial proxy reflect regression restatements sample security returns Shumway significant total assets total liabilities unrecognized intangible assets volatility