More than a Dummy: The Probability of Failure, Survival and Acquisition of Private Firms in Financial Distress

Abstract : We discuss three methodological issues concerning forecasts of the outcome of financial distress. First, we argue that rather than using a binary model the outcome of financial distress should be modeled using a multinomial specification that distinguishes between failure, survival as going concern, and acquisition. We also argue for a random rather than matched-pair sampling technique to better reflect decision making reality. Finally, we investigate the value of using industry-mean adjusted regressors. We find that the binary bankruptcy model is mis-specified relative to the multinomial model, that the matched sampling technique overstates model accuracy and that industry specific intercepts have better explanatory power than industry-adjusted regressors.
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Article dans une revue
European Management Review, Wiley, 2012, 9 (1), pp.NC


https://hal-hec.archives-ouvertes.fr/hal-00715485
Contributeur : Amaury Bouvet <>
Soumis le : samedi 7 juillet 2012 - 19:42:16
Dernière modification le : mardi 18 décembre 2012 - 13:33:56

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  • HAL Id : hal-00715485, version 1

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Thomas B. Astebro, J. K. Winter. More than a Dummy: The Probability of Failure, Survival and Acquisition of Private Firms in Financial Distress. European Management Review, Wiley, 2012, 9 (1), pp.NC. <hal-00715485>

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