Financial Distress Prediction of Cooperative Financial Institutions—Evidence for Taiwan Credit Unions

Chien-Min Kang, Ming-Chieh Wang and Lin Lin
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Chien-Min Kang: The Ph.D. Program in Strategy and Development of Emerging Industries, College of Management, National Chi-Nan University, 1 University Rd., Puli, Nantou 545, Taiwan
Ming-Chieh Wang: Department of International Business Studies, National Chi-Nan University, Nantou 545, Taiwan
Lin Lin: Newhuadu Business School, Min-Jiang University, Fuzhou 350108, China

IJFS, 2022, vol. 10, issue 2, 1-25

Abstract: In response to relatively little evidence on the determinants of the financial distress in cooperative financial institutions (e.g., Credit Unions), this paper proposes a distress indicator of Merton Distance to default (Merton DD), which was constructed with a z-score, possessed improved predictive capability, but reducing equity volatility. This model possesses the advantages of both hazard and modified Merton DD model, which could timely reflect market volatility and predict when distress would occur. As a demonstration, we applied this model to forecast the financial distress of credit unions in Taiwan. The results can provide more information to researchers.

Keywords: credit unions; financial distress; hazard; Merton DD (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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