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Taking the Twists into Account: Predicting Firm Bankruptcy Risk with Splines of Financial Ratios

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We demonstrate improvements in predictive power when introducing spline functions to take account of highly nonlinear relationships between firm failure and leverage, earnings, and liquidity in a logistic bankruptcy model. Our results show that modeling excessive nonlinearities yields substantially improved bankruptcy predictions, on the order of 70%?90%, compared with a standard logistic model. The spline model provides several important and surprising insights into nonmonotonic bankruptcy relationships. We find that low-leveraged as well as highly profitable firms are riskier than those given by a standard model, possibly a manifestation of credit rationing and excess cash-flow volatility..Printed Journal

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Ketersediaan

Call Number	Location	Available
JFQA4904	PSB lt.dasar - Pascasarjana	1

Penerbit	Cambridge Cambridge University Press.,
Edisi	-
Subjek	Bankruptcy predictive power logistic model
ISBN/ISSN	221090
Klasifikasi	-
Deskripsi Fisik	-
Info Detail Spesifik	-
Other Version/Related	Tidak tersedia versi lain
Lampiran Berkas	Tidak Ada Data