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Estimation of Firms' Default Rates in terms of Intangible Assets

Saiki Tsuchiya and Shinichi Nishioka
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Saiki Tsuchiya: Bank of Japan
Shinichi Nishioka: Bank of Japan

No 14-E-2, Bank of Japan Working Paper Series from Bank of Japan

Abstract: This paper quantitatively analyzes how firms' default rates are affected by intangible assets, which play a crucial role in business management but are difficult to assess objectively. We use intangible assets such as firms' technological capability and the qualifications of senior management, for which numerical data from each firm are available. The results are as follows: (1) intangible assets have statistical explanatory power for firms' default rates in addition to financial data; (2) a model that incorporates intangible assets has greater accuracy in estimating default rates than one that incorporates only financial data, and the difference in the accuracy is statistically significant; and (3) the impact of changes in intangible assets on firms' default rates is comparable with that of changes in financial data. Based on our analysis, it may be effective to take into consideration intangible assets to enhance the accuracy in estimating firms' default rates. Therefore, in assessing firms' credit risk, it is important to enhance the information on intangible assets to objectively assess these assets.

Keywords: Estimated default rates; Intangible assets; Logit model; Bootstrap method (search for similar items in EconPapers)
Date: 2014-02-07
New Economics Papers: this item is included in nep-acc, nep-bec, nep-ict and nep-rmg
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