On the Prediction of Corporate Financial Distress in the Light of the Financial Crisis: Empirical Evidence from Greek Listed Firms

Evangelos Charalambakis

International Journal of the Economics of Business, 2015, vol. 22, issue 3, 407-428

Abstract: This paper evaluates the impact of accounting and market-driven information on the prediction of bankruptcy for Greek firms using the discrete hazard approach. The findings show that a hazard model that incorporates three accounting ratio components of Z-score and three market-driven variables is the most appropriate model for the prediction of corporate financial distress in Greece. This model outperforms a univariate model that uses the expected default frequency (EDF) derived from the Merton distance to default model, a multivariate model that is exclusively based on accounting variables, a model that combines the EDF and accounting variables, and a multivariate model that uses only market-driven variables. Classification accuracy and bankruptcy forecast tests confirm the main results. The model is also able to sustain high long-term performance when augmenting the forecast horizon from one to two and three years.

Date: 2015
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Working Paper: On the prediction of corporate financial distress in the light of the financial crisis: empirical evidence from Greek listed firms (2013)
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DOI: 10.1080/13571516.2015.1020131

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