Predicting Financial Distress Using a MIDAS Hazard Model: Evidence from Listed Companies in China

Xiangrong Li, Maojun Zhang, Jiangxia Nan and Qingyuan Yang

Emerging Markets Finance and Trade, 2024, vol. 60, issue 4, 678-687

Abstract: This study aims to predict financial distress in an emerging country using data on ST listed companies in China from 2001 to 2021. A new Aalen hazard model with mixed data sampling (MIDAS) is adopted to investigate the impact of monthly macroeconomic variables and quarterly financial variables on financial distress. The empirical results show that the current ratio, operating profit ratio, current capital ratio, retention ratio, profit ratio and income ratio of listed companies have a significant impact on the time-varying intensity of financial distress. The consumer price index has a negative relation with the intensity of financial distress, while the production price index and credit spreads have a positive influence. Finally, the results of the robustness tests are consistent with those with different lag orders.

Date: 2024
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DOI: 10.1080/1540496X.2023.2244140

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