The systematic and idiosyncratic modules of bankruptcy risk

Parnes, Dror

doi:10.21314/jcr.2009.082

Cited by 4 publications

(2 citation statements)

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“…4;2013 ≝ (11) At this stage of the analysis we rely on prior literature and disentangle the probability to file for bankruptcy into two risk components, systematic and idiosyncratic. Jarrow and Yu (2001), Chauveau and Gatfaoui (2002), Hull and White (2004), Ou-Yang (2005), Neely and Winters (2006), Fletcher (2007), Eckner (2008), Giesecke (2008), and Parnes (2009) are among the more recent studies that scrutinize these systematic and the idiosyncratic bankruptcy risk components.…”

Section: The Theorymentioning

confidence: 99%

The Probability Distribution of Bankruptcy upon New Debt Issuances

Parnes¹

2013

IJEF

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This study theoretically examines the probability distribution of corporate bankruptcy upon new debt issuances. We develop a relatively simple Markov model with three feasible corporate phases, derive the stochastic transition rates and the time-related probabilities to remain in each business cycle, and further simulate realistic corporate paths. We find that when both corporate debt and assets are stochastic, the probability to be in Chapter 11 is generally lower among borrowers that portray higher debt variability. Moreover, we detect that the most probable time to be in bankruptcy occurs within two or three years of a new debt issuance.

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Section: The Theorymentioning

confidence: 99%

The Probability Distribution of Bankruptcy upon New Debt Issuances

Parnes¹

2013

IJEF

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“…insolvent if the firm's stock price loses 95% of its market value within two years (Beneda2007). Parners (2009) in developing a model for prediction of corporate bankruptcy asserted that Economic downturn increase the likelihood of a levered firm being unable to service its debt. Firms that are sensitive to market-wide input are more likely to experience an intense impact from global economic depression.…”

Section: VImentioning

confidence: 99%

Untitled

2013

GJEA

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The study is concerned with identifying flow based corporate insolvency symptoms that are critically catalyzing corporate failures in developing economies. Its other focus is to ascertain among the identified critical symptoms, those that are significant across industrial sectors. A sample of a thousand, two hundred financial statements from six hundred corporate bodies with inherent corporate insolvency indicators was investigated. All the investigated companies are Nigerian based corporate bodies. Technique of data analysis employed is Logit. The Log linear analysis was conducted at 5% significant level using SPSS software version 16. Five out of the twelve identified flow-based corporate insolvency indicators are found to be critically significant catalyzing business failures in developing economies. It is also found that certain insolvency symptoms are more manifest in catalyzing corporate failures across industrial sectors than others.

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