Multi-Period Corporate Failure Prediction with Stochastic Covariates / Darrell Duffie, Ke Wang.

Format:

Book

Author/Creator:

Duffie, Darrell.

Contributor:

National Bureau of Economic Research.

Wang, Ke.

Series:

Working Paper Series (National Bureau of Economic Research) no. w10743.

NBER working paper series no. w10743

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2004.

Summary:

We provide maximum likelihood estimators of term structures of conditional probabilities of bankruptcy over relatively long time horizons, incorporating the dynamics of firm-specific and macroeconomic covariates. We find evidence in the U.S. industrial machinery and instruments sector, based on over 28,000 firm-quarters of data spanning 1971 to 2001, of significant dependence of the level and shape of the term structure of conditional future bankruptcy probabilities on a firm's distance to default (a volatility-adjusted measure of leverage) and on U.S. personal income growth, among other covariates.Variation in a firm's distance to default has a greater relative effect on the term structure of future failure hazard rates than does a comparatively sized change in U.S. personal income growth, especially at dates more than a year into the future.

Notes:

Print version record

September 2004.