On the prediction of corporate financial distress in the light of the financial crisis: empirical evidence from Greek listed firms

Evangelos Charalambakis

No 164, Working Papers from Bank of Greece

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 EDF and accounting variables and a multivariate model that uses only market-driven variables. In-sample forecast accuracy tests confirm the main results. The out-of-sample evidence also suggests that the model yields the highest predictive ability during financial crisis when using data prior to the financial crisis.

Keywords: financial distress; financial forecasting; hazard model; expected default frequency (search for similar items in EconPapers)
JEL-codes: C41 G13 G17 G33 (search for similar items in EconPapers)
Pages: 38
Date: 2013-10
New Economics Papers: this item is included in nep-cfn, nep-for and nep-rmg
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Related works:
Journal Article: On the Prediction of Corporate Financial Distress in the Light of the Financial Crisis: Empirical Evidence from Greek Listed Firms (2015)
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