Identification of corporate distress in UK industrials: a conditional probability analysis approach
AbstractMultivariate discriminant analysis (MDA) has long been used to classify failing and non-failing firms with high accuracy rates, although a number of methodological flaws are well known. The alternative approach based on conditional probability analysis (CPA) models have been applied to forecast mergers and acquisitions and extended to the prediction of corporate failure. This is used here to distinguish between distressed and non-distressed companies in the UK industrial sector for the period 1985-1994. Results show that the CPA model is both efficient and consistent, has high accuracy levels and avoids the biased sampling problems that have been identified in MDA studies.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Applied Financial Economics.
Volume (Year): 14 (2004)
Issue (Month): 2 ()
Contact details of provider:
Web page: http://www.tandfonline.com/RAFE20
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Eisenbeis, Robert A, 1977. "Pitfalls in the Application of Discriminant Analysis in Business, Finance, and Economics," Journal of Finance, American Finance Association, vol. 32(3), pages 875-900, June.
- Lev, Baruch & Sunder, Shyam, 1979. "Methodological issues in the use of financial ratios," Journal of Accounting and Economics, Elsevier, vol. 1(3), pages 187-210, December.
- Wood, Douglas & Piesse, Jennie, 1988. "The information value of failure predictions in credit assessment," Journal of Banking & Finance, Elsevier, vol. 12(2), pages 275-292, June.
- Korol, Tomasz, 2013. "Early warning models against bankruptcy risk for Central European and Latin American enterprises," Economic Modelling, Elsevier, vol. 31(C), pages 22-30.
- Tseng, Fang-Mei & Lin, Lin, 2005. "A quadratic interval logit model for forecasting bankruptcy," Omega, Elsevier, vol. 33(1), pages 85-91, February.
- Lin Lin & Hsien-Chang Kuo & I-Liang Lin, 2008. "Merger and optimal number of firms: an integrated simulation approach," Applied Economics, Taylor & Francis Journals, vol. 40(18), pages 2413-2421.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.