Multi-period corporate failure prediction with stochastic covariates
By: Darrell Duffie, Ke Wang.
Contributors: Wang, Ke.; National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 10743; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 10743.
Publisher: National Bureau of Economic Research
Published: 2004
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Subjects: Business failures -- Mathematical models.
Description: "We provide maximum likelihood estimators of term structures of conditional probabilities of bankruptcy over relatively long time horizons, incorporating the dynamics of firm-specific and macroeconomic covariates.  We find evidence in the U.S.  industrial machinery and instruments sector, based on over 28,000 firm-quarters of data spanning 1971 to 2001, of significant dependence of the level and shape of the term structure of conditional future bankruptcy probabilities on a firm's distance to default (a volatility-adjusted measure of leverage) and on U.S.  personal income growth, among other covariates.Variation in a firm's distance to default has a greater relative effect on the term structure of future failure hazard rates than does a comparatively sized change in U.S.  personal income growth, especially at dates more than a year into the future"--National Bureau of Economic Research web site.
Notes: Includes bibliographical references.
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