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Bankruptcy Prediction for Chilean Companies

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  • Felipe Zurita L.

Abstract

This paper compares statistical and option-based models of financial instability for the group of listed Chilean companies. Statistical models have the proper fit, although the peculiar history of bankruptcies in the period of analysis, namely their concentration in the early period, questions their usefulness as a predictive tool. In models based on option theory, on the other hand, average bankruptcy probabilities appear to be highly correlated with bank risk indicators, and precedes them by up to three quarters. Overall, this first measuring effort is moderately successful, but reveals a number of paths worth exploring.

Suggested Citation

  • Felipe Zurita L., 2008. "Bankruptcy Prediction for Chilean Companies," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 11(1), pages 93-116, April.
    • Handle: RePEc:chb:bcchec:v:11:y:2008:i:1:p:93-116
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    References listed on IDEAS

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