Corporate Distress and Restructuring with Macroeconomic Fluctuations: The Cases of GM and Ford
AbstractTraditional methods for evaluating corporate credit risk rarely consider the impact of the macro economy on corporate value and performance. We argue that lenders and management can obtain valuable information about the need for and approach to restructuring by decomposing default predictions into "intrinsic" and macroeconomic factors. We apply a method previously used for measuring macroeconomic exposures on default predictions in order to filter out macroeconomic factors. In this paper the method is applied on an analysis of the Z-scores for GM and Ford for the period 1996–2005. The macro economy has affected the two firms in different ways with implications for managements' and creditors' approaches to restoring their financial health.
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Bibliographic InfoPaper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 780.
Length: 30 pages
Date of creation: 09 Dec 2009
Date of revision:
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Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden
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More information through EDIRC
Credit Risk; Creditworthiness; Z-Scores; Default Predictions; GM; Ford; Restructuring; Macroeconomic Exposure;
Find related papers by JEL classification:
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
- L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
- L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment
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