Title: Multi-period corporate failure prediction with stochastic covariates
First published: 2004
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.
Subjects: Mathematical models, Business failures
LC classification: HB1