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Investigation of financial distress with a dynamic logit based on the linkage between liquidity and profitability status of listed firms

Author

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  • Apostolos G. Christopoulos
  • Ioannis G. Dokas
  • Petros Kalantonis
  • Theodora Koukkou

Abstract

The scope of this paper is to investigate the predictability of financial distress, adopting a survival model based on dynamic logit for a sample of NYSE listed firms. The main assumption of this study is that liquidity and profitability constitute the key criteria for the configuration of financial distress status of a firm. Specifically, two independent models are applied for the period after the financial crisis of 2007–2008. The first model is constructed on the pillar of liquidity, and the classification into the subgroup of distressed firms is based on specific criteria such as current ratio, current liabilities / total liabilities, Equity / Liabilities and Total Debt / Total Asset. The second model is based on the pillar of profitability where the specific criteria for the classification from the primary group into the subgroup of distressed firms are ROE

Suggested Citation

  • Apostolos G. Christopoulos & Ioannis G. Dokas & Petros Kalantonis & Theodora Koukkou, 2019. "Investigation of financial distress with a dynamic logit based on the linkage between liquidity and profitability status of listed firms," Journal of the Operational Research Society, Taylor & Francis Journals, vol. 70(10), pages 1817-1829, October.
    • Handle: RePEc:taf:tjorxx:v:70:y:2019:i:10:p:1817-1829
    DOI: 10.1080/01605682.2018.1460017
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    Cited by:

    1. Bikramaditya Ghosh & Spyros Papathanasiou & Vandita Dar & Dimitrios Kenourgios, 2022. "Deconstruction of the Green Bubble during COVID-19 International Evidence," Sustainability, MDPI, vol. 14(6), pages 1-18, March.
    2. Chih‐Chun Chen & Chun‐Da Chen & Donald Lien, 2020. "Financial distress prediction model: The effects of corporate governance indicators," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 39(8), pages 1238-1252, December.
    3. Carmen Gallucci & Rosalia Santullli & Michele Modina & Vincenzo Formisano, 2023. "Financial ratios, corporate governance and bank-firm information: a Bayesian approach to predict SMEs’ default," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 27(3), pages 873-892, September.
    4. Ioannis E. Tsolas, 2021. "Firm Credit Scoring: A Series Two-Stage DEA Bootstrapped Approach," JRFM, MDPI, vol. 14(5), pages 1-12, May.
    5. Dimitrios Kenourgios & Spyros Papathanasiou & Anastasia Christina Bampili, 2022. "On the predictive power of CAPE or Shiller’s PE ratio: the case of the Greek stock market," Operational Research, Springer, vol. 22(4), pages 3747-3766, September.
    6. Mohammad Mizenur Rahaman & Adiba Rahman Bushra Chowdhury & Shamima Akter & Md. Zillur Rahman, 2023. "Accountant Perceptions and Attitudes Towards the Social Accounting Practices in Bangladesh," International Journal of Corporate Finance and Accounting (IJCFA), IGI Global, vol. 10(1), pages 1-19, January.
    7. Sofia Alexopoulou & Dimitris Balios & Theodoros Kounadeas, 2024. "Essential Factors When Designing a Cost Accounting System in Greek Manufacturing Entities," JRFM, MDPI, vol. 17(8), pages 1-33, August.

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