IDEAS home Printed from https://ideas.repec.org/a/now/fntacc/1400000018.html
   My bibliography  Save this article

Financial Statement Analysis and the Prediction of Financial Distress

Author

Listed:
  • Beaver, William H.
  • Correia, Maria
  • McNichols, Maureen F.

Abstract

Financial statement analysis has been used to assess a company's likelihood of financial distress — the probability that it will not be able to repay its debts. Financial statement analysis was used by credit suppliers to assess the credit worthiness of its borrowers. Today, financial statement analysis is ubiquitous and involves a wide variety of ratios and a wide variety of users, including trade suppliers, banks, creditrating agencies, investors and management, among others. Financial distress refers to the inability of a company to pay its financial obligations as they mature. Empirically, academic research in accounting and finance has focused on either bond default or bankruptcy. The basic issue is whether the probability of distress varies in a significant manner conditional upon the magnitude of the financial statement ratios. This monograph discusses the evolution of three main streams within the financial distress prediction literature: The set of dependent and explanatory variables used, the statistical methods of estimation, and the modeling of financial distress.

Suggested Citation

  • Beaver, William H. & Correia, Maria & McNichols, Maureen F., 2011. "Financial Statement Analysis and the Prediction of Financial Distress," Foundations and Trends(R) in Accounting, now publishers, vol. 5(2), pages 99-173, May.
    • Handle: RePEc:now:fntacc:1400000018
    DOI: 10.1561/1400000018
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1561/1400000018
    Download Restriction: no
    File URL: https://libkey.io/10.1561/1400000018?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Chen, Qi & Goldstein, Itay & Huang, Zeqiong & Vashishtha, Rahul, 2022. "Bank transparency and deposit flows," Journal of Financial Economics, Elsevier, vol. 146(2), pages 475-501.
    2. Janda, Karel & Moreira, David, 2016. "Predicting bankruptcy in European e-commerce sector," MPRA Paper 74460, University Library of Munich, Germany.
    3. Т. Sheshukova G. & A. Sanacheva A. & Т. Шешукова Г. & А. Саначева А., 2019. "Основы концепции анализа производственно-хозяйственной деятельности учреждений уголовно-исполнительной системы // Conceptual Framework to Analyze the Production and Economic Activity of the Institutio," Учет. Анализ. Аудит // Accounting. Analysis. Auditing, ФГОБУВО "Финансовый университет при Правительстве Российской Федерации" // Financial University under The Government of Russian Federation, vol. 6(2), pages 52-59.
    4. Niluthpaul Sarker & S. M. Khaled Hossain, 2023. "Ownership Structure and Financial Distress: Investigating the Moderating Effect of Audit Quality," International Journal of Economics and Financial Issues, Econjournals, vol. 13(6), pages 187-202, November.
    5. María Fernanda Meneses-González & Javier Eliecer Pirateque-Niño & Santiago David Segovia-Baquero, 2019. "Indicadores de alerta temprana para el sector corporativo privado colombiano," Borradores de Economia 1084, Banco de la Republica de Colombia.
    6. Geoffroy Enjolras & Philippe Madiès, 2020. "The role of bank analysts and scores in the prediction of financial distress: Evidence from French farms," Economics Bulletin, AccessEcon, vol. 40(4), pages 2978-2993.
    7. Massimiliano Celli, 2021. "The Accounting of Consolidation Differences in the European Accounting Practice," International Journal of Business and Management, Canadian Center of Science and Education, vol. 14(12), pages 102-102, July.
    8. Ashraf, Sumaira & Félix, Elisabete G.S. & Serrasqueiro, Zélia, 2020. "Development and testing of an augmented distress prediction model: A comparative study on a developed and an emerging market," Journal of Multinational Financial Management, Elsevier, vol. 57.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:now:fntacc:1400000018. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Lucy Wiseman (email available below). General contact details of provider: http://www.nowpublishers.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.