Indicators of corporate default : an EU based empirical study
AbstractThe present paper contributes to the research on the indicators that provide a warning of company failure by employing micro and macro variables within a framework of survival analysis using a sample of 0.4 million companies from the European Union (EU). The sensitivity of the results is checked using two complementary event definitions - bankruptcy and negative equity. Our results imply that the baseline hazard of a default is a U-shaped function of the time the company has survived. High leverage and a low return on assets appear to be strong predictors of failure. Macroeconomic variables give mixed evidence for old and new member states as well as for the two default definitions
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Bibliographic InfoPaper provided by Bank of Estonia in its series Bank of Estonia Working Papers with number 2007-10.
Date of creation: 04 Sep 2007
Date of revision: 04 Sep 2007
Postal: Estonia bld. 13, 15095 Tallinn, ESTONIA
Find related papers by JEL classification:
- G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
- C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-09-16 (All new papers)
- NEP-BEC-2007-09-16 (Business Economics)
- NEP-EEC-2007-09-16 (European Economics)
- NEP-RMG-2007-09-16 (Risk Management)
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