Financial versus Non-Financial Information for Default Prediction: Evidence from Sri Lanka and the USA

Jayasuriya Mahapatabendige Ruwani Fernando, Leon Li and Greg Hou

Emerging Markets Finance and Trade, 2020, vol. 56, issue 3, 673-692

Abstract: We report the effectiveness of corporate governance variables (GOVs) in default prediction, in a comparative study between Sri Lanka and the USA. Twelve GOVs are tested in addition to the standard financial data. A panel logit model framework is employed to conduct empirical tests on 730 Sri Lankan and 3280 USA observations from 2000 to 2015. Whilst an integrated model provides overall stronger predictive value; financial information is more relevant for USA firms. GOVs appear more relevant in emerging markets than in mature markets, but the effectiveness of the individual GOVs differs between countries.

Date: 2020
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DOI: 10.1080/1540496X.2018.1545644

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