 Forecasting corporate default risk in ChinaXuan Zhang, Yang Zhao and Xiao Yao International Journal of Forecasting, 2022, vol. 38, issue 3, 1054-1070 Abstract: Default risk prediction can not only provide forward-looking and timely risk measures for regulators and investors, but also improve the stability of the financial system. However, the determinants of corporate default risk in China have not been well-identified. An empirical analysis was conducted using a unique dataset of default events in the Chinese market to fill this gap. First, we demonstrated that the default probability estimated by a structural model, which is widely used in the literature, do not fully reveal the default risk of firms in China. Second, we classified default events into minor and major defaults for empirical analysis. We found that firms that survive minor defaults behave differently from other bankrupt firms. Our results suggest that the determinants of corporate default risk in China and the United States differ. We also found that a firm’s continued increase in cash holdings is one of the most important signs of default. Overall, our study significantly improves the accuracy of forecasting corporate default risk in China. Keywords: Default risk prediction; Major default; Minor default; China’s publicly listed firms; Logit model (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:intfor:v:38:y:2022:i:3:p:1054-1070 DOI: 10.1016/j.ijforecast.2021.04.009 Access Statistics for this article International Journal of Forecasting is currently edited by R. J. Hyndman More articles in International Journal of Forecasting from Elsevier |
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