Predicting Financial Distress. What is Financial Distress?
|
|
- Clemence Juliet Wilkins
- 6 years ago
- Views:
Transcription
1 Predicting Financial Distress What is Financial Distress? Operating cash flows insufficient to satisfy current obligations and the firm is forced to take corrective action Stock-based insolvency» Occurs when the value of assets < value of promised payments to debt Flow-based insolvency» Occurs when operating cash flows are insufficient to cover contractually required payments. FIN 551: Fundamental Analysis 2 FIN 551: Fundamental Analysis 1
2 Insolvency Solvent Firm Insolvent Firm Stock-Based Insolvency Assets Debt Equity Assets Debt Flow-Based Insolvency $ Negative equity Cash flow shortfall Contractual obligation Firm cash flow Insolvency FIN 551: Fundamental Analysis 3 Prediction Models First stop: Forecast a firm s debt rating Why bother?» S&P rating changes lag Next stop: Forecast bankruptcy Altman s Z-score models Emery s lambda index model. FIN 551: Fundamental Analysis 4 FIN 551: Fundamental Analysis 2
3 CCC75.4 S&P Debt Ratings S&P % of Public Firms Pre-tax Return LT Capital Median Ratios Pre-tax Interest Coverage NWC / Total debt LT Debt / Total Capital AAA 1.2% 24.5% % 11.0% AA 5.4% 18.4% % 19.3% A 16.2% 13.7% % 30.9% BBB 19.5% 9.7% % 39.5% BB 26.1% 9.6% % 50.5% B 28.6% 6.4% % 58.9% CCC 1.1% 5.5% % 75.4% FIN 551: Fundamental Analysis 5 Prediction of Debt Ratings Kaplan & Urwitz Models Coefficients Variable Model 1 Model 2 Intercept Total assets = subordinated debt; 0 = unsubordinated LT debt / total assets Market model beta n.a. NI / total assets σ market model residual n.a. CV in NI (5 yrs.) n.a EBIT / interest Predictions Score > 6.76 = AAA; Score >.5.19 = AA; Score > 3.28 = A; Score > 1.57 = BBB; Score < 0 = BB FIN 551: Fundamental Analysis 6 FIN 551: Fundamental Analysis 3
4 Predicting Bankruptcy: Altman s Z-Score Models Private + Non-mfr. Firms Z = 6.72 * EBIT / Total assets * NWC / Total assets * BV equity /BV debt * Total retained earnings / Total assets Prediction Z < 1.23 Bankruptcy looming 1.23 < Z < 2.90 Gray area Z > 2.90 No bankruptcy Public Mfr. Firms Z = 3.3 * EBIT / Total assets * NWC / Total assets * MV equity / BV debt * Total retained earnings / Total assets * Sales / Total assets Prediction Z < 1.81 Bankruptcy looming 1.81 > Z < 2.99 Gray area Z > 2.99 No bankruptcy FIN 551: Fundamental Analysis 7 ZETA Model Proprietary model Zeta is negatively correlated with Barra s fundamental betas and Value Line s financial strength score Variables»ROA» Standard deviation of ROA over 5 years» Interest coverage ratio» Retained earnings / total assets (most important)» Current ratio» Equity / total capital ratio (average 5 years)» Tangible assets. FIN 551: Fundamental Analysis 8 FIN 551: Fundamental Analysis 4
5 Keep in Mind Most prediction models have inherent flaws Derived on a limited sample Derived for a certain period of time» These problems exist with the bond rating model and Altman s bankruptcy Z-score models When using the models, ask yourself: Is the model still valid? Emery s lambda index model is statistically better. FIN 551: Fundamental Analysis 9 Emery s Lambda Index Lambda Index = Liquid reserve + expected CF CF uncertainty Liquid reserve = Cash + marketable securities + available lines of credit Expected CF = Net cash flow expected to be received or paid during the period CF uncertainty = σ net cash flow for the period. FIN 551: Fundamental Analysis 10 FIN 551: Fundamental Analysis 5
6 Why the Lambda Index? Includes cash flows and lines of credit Excludes illiquid items Recognizes uncertainty Although different, it s a coverage ratio Provides estimate of likelihood of insolvency. FIN 551: Fundamental Analysis 11 Does It Work? Results of a test on 52 bankrupt and 52 solvent companies: Years Percent Average Lambda Values Before Correctly Failed Solvent Failure Classified Companies Companies 5 81% % % % % Source: Gary W. Emery and Kenneth O. Cogger, The Measurement of Liquidity, Journal of Accounting Research, Autumn 1982, pp FIN 551: Fundamental Analysis 12 FIN 551: Fundamental Analysis 6
7 Calculating the CF Variables Actual Actual CF - (Actual CF - Expected Year Cash Flow Expected CF CF) Squared 1991 $ 69.2 $ $ 11, , , , ,966.0 Sums $ $ 1,586,313.9 Expected CF = $880.7 / 5 = $176.1 σ CF = SQRT($1,586,313.9 / 4) = $629.7 What about deducting necessary investments to maintain competitiveness in markets; i.e., use FCF? FIN 551: Fundamental Analysis 13 Likelihood of Insolvency in 95 Cash & securities 1995 = $952 Expected cash flow = $176.1 σ of cash flows = $629.7 Lambda = $952 + $176.1 = 1.79 $629.7 Estimated likelihood of insolvency = 1 - N(lambda) = = or 4%. Taken from a probability table for the normal distribution FIN 551: Fundamental Analysis 14 FIN 551: Fundamental Analysis 7
8 Apple s Lambda Using Historical Cash Flow From Operations Lambda FIN 551: Fundamental Analysis 15 Apple s Lambda Using Historical Cash Flow From Operations 6 5 Lambda Trend FIN 551: Fundamental Analysis 16 FIN 551: Fundamental Analysis 8
9 The End FIN 551: Fundamental Analysis 17 FIN 551: Fundamental Analysis 9
Credit Markets: Is It a Bubble?
Credit Markets: Is It a Bubble? Dr. Edward Altman NYU Stern School of Business 2015 Luncheon Conference TMA, NY Chapter New York January 21, 2015 1 1 Is It a Bubble? Focus on Default Rates in Credit Markets
More informationAre You Prepared for a Credit Downturn? A Conversation with Dr. Edward Altman
Are You Prepared for a Credit Downturn? A Conversation with Dr. Edward Altman Agenda Introduction & Housekeeping Keynote: Are We in a Credit Bubble? Q&A 2 Welcome! Dr. Edward Altman Professor of Finance
More informationManaging a Financial Turnaround The GTI Case
Managing a Financial Turnaround The GTI Case Dr. Edward I. Altman Stern School of Business New York University Corporate Credit Scoring Models and the Bond Rating Equivalence 2 Forecasting Distress With
More informationQuantifying credit risk in a corporate bond
Quantifying credit risk in a corporate bond Srichander Ramaswamy Head of Investment Analysis Beatenberg, September 003 Summary of presentation What is credit risk? Probability of default Recovery rate
More informationGoldstar's Financial Condition Analysis for the Period from to
Goldstar's Financial Condition Analysis for the Period from 01.01.2008 to 31.12.2010 1. Goldstar's Financial Position Analysis 1.1. Structure of the Assets and Liabilities 1.2. Net Assets (Net Worth) 1.3.
More informationCOMPREHENSIVE ANALYSIS OF BANKRUPTCY PREDICTION ON STOCK EXCHANGE OF THAILAND SET 100
COMPREHENSIVE ANALYSIS OF BANKRUPTCY PREDICTION ON STOCK EXCHANGE OF THAILAND SET 100 Sasivimol Meeampol Kasetsart University, Thailand fbussas@ku.ac.th Phanthipa Srinammuang Kasetsart University, Thailand
More informationA Methodology for Estimating Credit Ratings and the Cost of Debt for Business Units and Privatelyheld
A Methodology for Estimating Credit Ratings and the Cost of Debt for Business Units and Privatelyheld Companies Andrea M. A. F. Minardi (minardi@isp.edu.br Ibmec São Paulo tel. 55-11-45042417) Antonio
More informationHomework Solutions - Lecture 2 Part 2
Homework Solutions - Lecture 2 Part 2 1. In 1995, Time Warner Inc. had a Beta of 1.61. Part of the reason for this high Beta was the debt left over from the leveraged buyout of Time by Warner in 1989,
More informationKO Financial Analysis, Page 1 of 10
KO Financial Analysis, Page 1 of 10 Enter Firm Ticker KO values in millions Historical Income Statements Income Statement Forecasting Percentages Enter first year in cell B5 2005 2006 2007 2008 2009 2005
More informationCHAPTER 5 Bonds and Their Valuation
5-1 5-2 CHAPTER 5 Bonds and Their Valuation Key features of bonds Bond valuation Measuring yield Assessing risk Key Features of a Bond 1 Par value: Face amount; paid at maturity Assume $1,000 2 Coupon
More informationThe Declining Credit Quality of U.S. Corporate Debt: Myth or Reality?
THE JOURNAL OF FINANCE VOL. LIII, NO. 4 AUGUST 1998 The Declining Credit Quality of U.S. Corporate Debt: Myth or Reality? MARSHALL E. BLUME, FELIX LIM, and A. CRAIG MACKINLAY* ABSTRACT In recent years,
More informationThe Evolution of the Altman Z-Score Models & Their Applications to Financial Markets
The Evolution of the Altman Z-Score Models & Their Applications to Financial Markets Dr. Edward Altman NYU Stern School of Business STOXX Ltd. London March 30, 2017 1 Scoring Systems Qualitative (Subjective)
More informationEvolution of bankruptcy prediction models
Evolution of bankruptcy prediction models Dr. Edward Altman NYU Stern School of Business 1 st Annual Edward Altman Lecture Series Warsaw School of Economics Warsaw, Poland April 14, 2016 1 Scoring Systems
More informationCorporate Borrowing and Leverage Effects
FIN 614 Mixing Debt and Equity Professor Robert B.H. Hauswald Kogod School of Business, AU Corporate Borrowing and Leverage Effects Continue with deviations from ideal world of M&M taxes, financial and
More informationWeb Extension 25A Multiple Discriminant Analysis
Nikada/iStockphoto.com Web Extension 25A Multiple Discriminant Analysis As we have seen, bankruptcy or even the possibility of bankruptcy can cause significant trauma for a firm s managers, investors,
More informationZ-Score History & Credit Market Outlook
Z-Score History & Credit Market Outlook Dr. Edward Altman NYU Stern School of Business CT TMA New Haven, CT September 26, 2017 1 Scoring Systems Qualitative (Subjective) 1800s Univariate (Accounting/Market
More informationChapter 3: Debt financing. Albert Banal-Estanol
Corporate Finance Chapter 3: Debt financing Albert Banal-Estanol Debt issuing as part of a leverage buyout (LBO) What is an LBO? How to decide among these options? In this chapter we should talk about
More informationChapter 5. Bonds, Bond Valuation, and Interest Rates
Chapter 5 Bonds, Bond Valuation, and Interest Rates 1 Chapter 5 applies Time Value of Money techniques to the valuation of bonds, defines some new terms, and discusses how interest rates are determined.
More informationCredit Risk II. Bjørn Eraker. April 12, Wisconsin School of Business
Wisconsin School of Business April 12, 2012 More on Credit Risk Ratings Spread measures Specific: Bloomberg quotes for Best Buy Model of credit migration Ratings The three rating agencies Moody s, Fitch
More information78 THE BASICS OF RISK MODELS OF DEFAULT RISK
78 THE BASICS OF RISK While the initial tests of the APM suggested that they might provide more promise in terms of explaining differences in returns, a distinction has to be drawn between the use of these
More informationWARSAW Marcin Przasnyski
WARSAW 2014 Marcin Przasnyski What is An independent stock market information company Publishing a portal and a weekly newspaper Approved by Polish Financial Supervision Authority Targetted to individual
More informationS&P Global Ratings Definitions
S&P Global Ratings s Table Of Contents I. GENERAL-PURPOSE CREDIT RATINGS A. Issue Credit Ratings B. Issuer Credit Ratings II. CREDITWATCH, RATING OUTLOOKS, LOCAL CURRENCY AND FOREIGN CURRENCY RATINGS A.
More informationThe Statistical Mechanics of Financial Markets
The Statistical Mechanics of Financial Markets Johannes Voit 2011 johannes.voit (at) ekit.com Overview 1. Why statistical physicists care about financial markets 2. The standard model - its achievements
More informationS&P Global Ratings Definitions
S&P Global Ratings s Table Of Contents I. GENERAL-PURPOSE CREDIT RATINGS A. Issue Credit Ratings B. Issuer Credit Ratings II. CREDITWATCH, RATING OUTLOOK, LOCAL CURRENCY AND FOREIGN CURRENCY RATINGS A.
More informationFUNDAMENTALS OF CREDIT ANALYSIS
FUNDAMENTALS OF CREDIT ANALYSIS 1 MV = Market Value NOI = Net Operating Income TV = Terminal Value RC = Replacement Cost DSCR = Debt Service Coverage Ratio 1. INTRODUCTION CR = Credit Risk Y.S = Yield
More informationEconomics 173A and Management 183 Financial Markets
Economics 173A and Management 183 Financial Markets Fixed Income Securities: Bonds Bonds Debt Security corporate or government borrowing Also called a Fixed Income Security Covenants or Indenture define
More informationAAPL. Apple Inc. Sector: Information Technology HOLD. Analysts: Alexander Anguiano, Applied Portfolio Management. Bryan Lunzmann and Sam Olberding
AAPL Analysts: Alexander Anguiano, Applied Portfolio Management Bryan Lunzmann and Sam Olberding Apple Inc. Sector: Information Technology HOLD Report Date: 4/4/215 Market Cap (mm) $671,725 Annual Dividend
More informationMapping of Scope Rating s credit assessments under the Standardised Approach
30 October 2014 Mapping of Scope Rating s credit assessments under the Standardised Approach 1. Executive summary 1. This report describes the mapping exercise carried out by the Joint Committee to determine
More informationApplied Corporate Finance. Unit 4
Applied Corporate Finance Unit 4 Capital Structure Types of Financing Financing Behaviours Process of Raising Capital Tradeoff of Debt Optimal Capital Structure Various approaches to arriving at the optimal
More informationMapping of GBB credit assessments under the Standardised Approach
30 October 2014 Mapping of GBB credit assessments under the Standardised Approach 1. Executive summary 1. This report describes the mapping exercise carried out by the Joint Committee to determine the
More informationA Guide to Investing In Corporate Bonds
A Guide to Investing In Corporate Bonds Access the corporate debt income portfolio TABLE OF CONTENTS What are Corporate Bonds?... 4 Corporate Bond Issuers... 4 Investment Benefits... 5 Credit Quality and
More informationCOLLATERALIZED LOAN OBLIGATIONS (CLO) Dr. Janne Gustafsson
COLLATERALIZED LOAN OBLIGATIONS (CLO) 4.12.2017 Dr. Janne Gustafsson OUTLINE 1. Structured Credit 2. Collateralized Loan Obligations (CLOs) 3. Pricing of CLO tranches 2 3 Structured Credit WHAT IS STRUCTURED
More informationValuing Equity in Firms in Distress!
Valuing Equity in Firms in Distress! Aswath Damodaran http://www.damodaran.com Aswath Damodaran! 1! The Going Concern Assumption! Traditional valuation techniques are built on the assumption of a going
More informationAFM 371 Winter 2008 Chapter 31 - Financial Distress
AFM 371 Winter 2008 Chapter 31 - Financial Distress 1 / 14 Outline Background What Happens in Financial Distress? Bankruptcy Liquidation and Reorganization Current Issues in Financial Distress Two Practice
More informationAnalyzing the Effects of Credit Rating Changes, the Recent Financial Crisis and Other Variables on Firms' Debt Levels
Claremont Colleges Scholarship @ Claremont CMC Senior Theses CMC Student Scholarship 2011 Analyzing the Effects of Credit Rating Changes, the Recent Financial Crisis and Other Variables on Firms' Debt
More informationStandard & Poor's Ratings Definitions
Table Of Contents I. GENERAL-PURPOSE CREDIT RATINGS A. Issue Credit Ratings B. Issuer Credit Ratings II. CREDITWATCH, RATING OUTLOOK, LOCAL CURRENCY AND FOREIGN CURRENCY RATINGS A. CreditWatch B. Rating
More informationVerizon Communications Inc. Sector: Telecommunication Services Hold
Applied Portfolio Management Analysts: Travis Hirt, Brandon Holle and Mark Latimer VZ Verizon Communications Inc. Sector: Telecommunication Services Hold Report Date: 4/4/25 Market Cap (mm) $85,94 Annual
More informationHandout for Unit 4 for Applied Corporate Finance
Handout for Unit 4 for Applied Corporate Finance Unit 4 Capital Structure Contents 1. Types of Financing 2. Financing Choices 3. How much debt is good? 4. Debt Benefits vs Costs 5. Approaches to arriving
More informationBasel II Pillar 3 Disclosure 2011
Basel II Pillar 3 Disclosure 2011 Bank of China (UK) Ltd I. Overview Background Bank of China (UK) Ltd ( BOC UK or the bank ), authorised and regulated by the FSA, is a wholly owned subsidiary of Bank
More informationBonds and Their Valuation
Chapter 7 Bonds and Their Valuation Key Features of Bonds Bond Valuation Measuring Yield Assessing Risk 7 1 What is a bond? A long term debt instrument in which a borrower agrees to make payments of principal
More informationInvestment Appendix April 2016
Investment Appendix April 2016 Investment Appendix This is a translation of the original Dutch text. This translation is furnished for the customer s convenience only. The original Dutch text will be binding
More informationOptimal Debt Ratio for a young, growth firm: Baidu
Optimal Debt Ratio for a young, growth firm: Baidu The optimal debt ratio for Baidu is between 0 and 10%, close to its current debt ratio of 5.23%, and much lower than the optimal debt ratios computed
More informationMapping of INC Rating Sp. z o.o. s credit assessments under the Standardised Approach
18/07/2017 Mapping of INC Rating Sp. z o.o. s credit assessments under the Standardised Approach 1. Executive summary 1. This report describes the exercise carried out by the Joint Committee (JC) to determine
More informationChapter 12: Estimating the Cost of Capital
Chapter 12: Estimating the Cost of Capital -1 Chapter 12: Estimating the Cost of Capital Fundamental question: Where do we get the numbers to estimate the cost of capital? => How do we implement the CAPM
More informationNational Ratings Definitions
National Ratings Definitions AM Best Rating Descriptor Definition A++ Superior Assigned to companies that have, in our opinion, a superior ability to meet their ongoing insurance obligations. A++ Superior
More informationAnalysis write-up at: GOOGLE INC. (GOOG) #2 SUSTAINABLE REVENUE GROWTH
GOOGLE INC. (GOOG) NOMINAL REVENUE 35.00% 3 25.00% 2 15.00% 1 5.00% #1 REAL REVENUE PRICE ADJUSTED REVENUE 29.7% 28.3% 23.8% 6.7% #4 OPERATING EXPENSE CONTROL NOI$ GP$ NOI% GP% CORE OPER EXP% 8 $30,000,000
More informationEffect of Firm Age in Credit Scoring Model for Small Sized Firms
Proceedings of the Asia Pacific Industrial Engineering & Management Systems Conference Effect of Firm Age in Credit Scoring Model for Small Sized Firms Kenzo Ogi Risk Management Department Japan Finance
More informationSUPPLEMENTARY REGULATORY CAPITAL DISCLOSURE FOURTH QUARTER 2015
SUPPLEMENTARY REGULATORY CAPITAL DISCLOSURE FOURTH QUARTER (unaudited) For more information: Ghislain Parent, Chief Financial Officer and Executive Vice-President Finance and Treasury, Tel: 514 394-6807
More informationSUPPLEMENTARY REGULATORY CAPITAL DISCLOSURE FIRST QUARTER 2018
SUPPLEMENTARY REGULATORY CAPITAL DISCLOSURE FIRST QUARTER (unaudited) For more information: Ghislain Parent, Chief Financial Officer and Executive Vice-President Finance and Treasury, Tel: 514 394-6807
More informationPredicting Market Prices of Fixed Income Instruments Using Axiom Valuation Solutions Credit Rating and Fair Value Pricing Platform
Predicting Market Prices of Fixed Income Instruments Using Valuation Solutions Credit Rating and Fair Value Pricing Platform By Dr. Stanley Jay Feldman, Chief Valuation Officer John Roberts, Managing Director
More informationModels Multivariate GARCH Models Updated: April
Financial i Econometrics and Volatility Models Multivariate GARCH Models Updated: April 21. 2010 Eric Zivot Professor and Gary Waterman Distinguished Scholar Department of Economics, University of Washington
More informationAssessing the probability of financial distress of UK firms
Assessing the probability of financial distress of UK firms Evangelos C. Charalambakis Susanne K. Espenlaub Ian Garrett First version: June 12 2008 This version: January 15 2009 Manchester Business School,
More informationBANK OF NEW ZEALAND QUOTATION DOCUMENT FOR MEDIUM TERM NOTES. 23 August 2016
BANK OF NEW ZEALAND QUOTATION DOCUMENT FOR MEDIUM TERM NOTES 23 August 2016 Overview Bank of New Zealand issued the Medium Term Notes ("MTNs") referred to in this document on the Issue Date, as described
More informationSUPPLEMENTARY REGULATORY CAPITAL DISCLOSURE. First Quarter 2015
SUPPLEMENTARY REGULATORY CAPITAL DISCLOSURE First Quarter 2015 (unaudited) For more information: Ghislain Parent, Chief Financial Officer and Executive Vice-President Finance and Treasury, Tel: 514 394-6807
More information2013/2014. Tick true or false: 1. "Risk aversion" implies that investors require higher expected returns on riskier than on less risky securities.
Question One: Tick true or false: 1. "Risk aversion" implies that investors require higher expected returns on riskier than on less risky securities. 2. Diversification will normally reduce the riskiness
More informationInvestment and internal funds of distressed firms
Journal of Corporate Finance 11 (2005) 449 472 www.elsevier.com/locate/econbase Investment and internal funds of distressed firms Sanjai Bhagat a, T, Nathalie Moyen a, Inchul Suh b a Leeds School of Business,
More informationThe Development of Alternative Financing Sources for SMEs & the Assessment of SME Credit Risk
The Development of Alternative Financing Sources for SMEs & the Assessment of SME Credit Risk Dr. Edward Altman NYU Stern School of Business GSCFM Program NACM Washington D.C. June 26, 2019 1 Scoring Systems
More informationSection 1. Long Term Risk
Section 1 Long Term Risk 1 / 49 Long Term Risk Long term risk is inherently credit risk, that is the risk that a counterparty will fail in some contractual obligation. Market risk is of course capable
More informationInterrelationship between Profitability, Financial Leverage and Capital Structure of Textile Industry in India Dr. Ruchi Malhotra
Interrelationship between Profitability, Financial Leverage and Capital Structure of Textile Industry in India Dr. Ruchi Malhotra Assistant Professor, Department of Commerce, Sri Guru Granth Sahib World
More informationMATELAN Research. InVision 49.0 Buy. Excellent margin trend in Prelims. Update Note. 24 February Company / Sector Fair Value Recommendation
Update Note Price as of 21/02/13: 4 24 February 2014 Company / Sector Fair Value Recommendation InVision 49.0 Buy Technology: Cloud Computing ( 34) (Buy) Excellent margin trend in Prelims Share price performance
More informationCHAPTER 8 Risk and Rates of Return
CHAPTER 8 Risk and Rates of Return Stand-alone risk Portfolio risk Risk & return: CAPM The basic goal of the firm is to: maximize shareholder wealth! 1 Investment returns The rate of return on an investment
More informationAllison Behuniak, Taylor Jordan, Bettina Lopes, and Thomas Testa. William Wrigley Jr. Company: Capital Structure, Valuation, and Cost of Capital
Allison Behuniak, Taylor Jordan, Bettina Lopes, and Thomas Testa William Wrigley Jr. Company: Capital Structure, Valuation, and Cost of Capital The Situation ² Aurora Borealis was an active-investor hedge
More informationPredicting Corporate Bankruptcy using Financial Ratios: An Empirical Analysis: Indian evidence from
Predicting Corporate Bankruptcy using Financial Ratios: An Empirical Analysis: Indian evidence from 2007-2010 Junare S. O. Director, Shri Jayrambhai Patel Institute of Management and Computer Studies,
More informationANALYSIS OF DETERMINANTS OF INTEREST RATES OF CORPORATE BONDS LISTED ON THE CATALYST BOND MARKET
ANALYSIS OF DETERMINANTS OF INTEREST RATES OF CORPORATE BONDS LISTED ON THE CATALYST BOND MARKET IN POLAND Justyna Dyduch AGH University of Science and Technology, Faculty of Management, Cracow, Poland
More informationAsset Pricing Anomalies and Financial Distress
Asset Pricing Anomalies and Financial Distress Doron Avramov, Tarun Chordia, Gergana Jostova, and Alexander Philipov March 3, 2010 1 / 42 Outline 1 Motivation 2 Data & Methodology Methodology Data Sample
More informationACCOUNTING. bankerzhaus.wordpress.com 1
ACCOUNTING Income Statement (IS) -- a financial statement that measures a company's financial performance over a specific accounting period Revenue / COGS and Operating Expenses / Operating Income (EBIT)
More informationTendencies and Characteristics of Financial Distress: An Introductory Comparative Study among Three Industries in Albania
Athens Journal of Business and Economics April 2016 Tendencies and Characteristics of Financial Distress: An Introductory Comparative Study among Three Industries in Albania By Zhaklina Dhamo Vasilika
More informationAudit Opinion Prediction Before and After the Dodd-Frank Act
Audit Prediction Before and After the Dodd-Frank Act Xiaoyan Cheng, Wikil Kwak, Kevin Kwak University of Nebraska at Omaha 6708 Pine Street, Mammel Hall 228AA Omaha, NE 68182-0048 Abstract Our paper examines
More informationEgan-Jones Ratings Company
Egan-Jones Company 2018 Form NRSRO Annual Certification Exhibit 1 Performance Statistics Attached please find the Transition and Default Rates listed as follows: Financial Institutions, Brokers, or Dealers
More informationAssessing the Probability of Failure by Using Altman s Model and Exploring its Relationship with Company Size: An Evidence from Indian Steel Sector
DOI: 10.15415/jtmge.2017.82003 Assessing the Probability of Failure by Using Altman s Model and Exploring its Relationship with Company Size: An Evidence from Indian Steel Sector Abstract Corporate failure
More informationMorningstar Credit Ratings Definitions and Other Related Opinions and Identifiers
Morningstar Credit Ratings Definitions and Other Related Opinions and Identifiers August 2016 2016 Morningstar Credit Ratings, LLC. All Rights Reserved. Morningstar Credit Ratings, LLC is a wholly-owned
More informationSystemic Risk Monitoring of the Austrian Banking System
Systemic Risk Monitoring of the Austrian Banking System Helmut Elsinger, Alfred Lehar, and Martin Summer Department of Finance, University of Vienna, Austria Haskayne School of Business, University of
More informationAmerico Todisco. The estimate of default probability in Internal Rating Systems. SAS Forum International Copenhagen June
SAS Forum International Copenhagen 2004 15-17 June The estimate of default probability in Internal Rating Systems Americo Todisco University of Siena, Faculty of Economics Doctorate Program in Law & Economics
More informationEgan-Jones Ratings Company
Egan-Jones Ratings Company Providing Timely, Accurate Credit Ratings To Institutional Investors Form NRSRO Exhibit #1 Credit ratings performance measurement statistics. March 28, 2016 Overview An Egan-Jones
More informationIMPACT OF FINANCIAL STRENGTH ON LEVERAGE: A STUDY WITH SPECIAL REFERENCE TO SELECT COMPANIES IN INDIA
IMPACT OF FINANCIAL STENGTH ON LEVEAGE: A STUDY WITH SPECIAL EFEENCE TO SELECT COMPANIES IN INDIA M. S. amaratnam 1 and. Jayaraman 2 1 Assistant Professor (Stage III), Faculty of Management Studies, Sri
More informationEXPLAINING CASH VALUE vs. TERM
EXPLAINING CASH VALUE vs. TERM FOR TRAINING PURPOSES ONLY, NOT FOR PUBLIC DISTRIBUTION 1 Types of Life Insurance Group/Employer Sponsored insurance Cash Value insurance Whole Life Universal Life Variable
More informationThe Financial Crisis and the Bailout
The Financial Crisis and the Bailout Steven Kaplan University of Chicago Graduate School of Business 1 S. Kaplan Intro This talk: What is the problem? How did we get here? What do we need to do? What does
More informationTurnarounds. Financial Decline: When Bad Things Happen to Good Companies
Turnarounds Financial Decline: When Bad Things Happen to Good Companies 1 A Better Place 2 Financial Distress Risk View from an outsider s perspective investors creditors Also useful for evaluating prospects
More informationA MULTIVARIATE ANALYSIS OF FINANCIAL AND MARKET- BASED VARIABLES FOR BOND RATING PREDICTION
Martina NOVOTNÁ, PhD Technical University of Ostrava Department of Finance Ostrava E-mail: martina.novotna@vsb.cz. A MULTIVARIATE ANALYSIS OF FINANCIAL AND MARKET- BASED VARIABLES FOR BOND RATING PREDICTION
More informationDr. Altman on the Mammoth Debt Problem
WEBINAR Dr. Altman on the Mammoth Debt Problem Annotated Slides Latest Saved Version: 7/6/2018 HIGHLIGHTS EDITION Here s why this is a very bad time to let down your guard. - Jerry Flum Dr. Edward Altman
More informationMethodology for Rating Parents, Subsidiaries, and Issues
Methodology for Rating Parents, Subsidiaries, and Issues October 2015 Page 2 of 9 Methodology for Rating Parents, Subsidiaries, and Issues Ratings of individual debt instruments may be adjusted up or down
More informationCONFIDENCE-BASED MEASURE OF BANK SOLVENCY
CONFIDENCE-BASED MEASURE OF BANK SOLVENCY Davide Mare University of Edinburgh, UK Davide.Mare@ed.ac.uk Fernando Moreira University of Edinburgh, UK Fernando.Moreira@ed.ac.uk Roberto Rossi University of
More informationInvesting.xls debt charts 1 10/4/2010
Company Explorer - Debt Summary Service Corp. International SCI 817565104 2797560 NYSE Common stock Other Consumer Services 04-Oct-2010 ICMA / Mergent / Reuters Global Fundamentals U.S. Dollar 600 500
More informationPossibilities for the Application of the Altman Model within the Czech Republic
Possibilities for the Application of the Altman Model within the Czech Republic MICHAL KARAS, MARIA REZNAKOVA, VOJTECH BARTOS, MAREK ZINECKER Department of Finance Brno University of Technology Brno, Kolejní
More informationMapping of Spread Research credit assessments under the Standardised Approach
30 October 2014 Mapping of Spread Research credit assessments under the Standardised Approach 1. Executive summary 1. This report describes the mapping exercise carried out by the Joint Committee to determine
More informationAsset manager profiles
SECTION 1 Asset manager profiles John Hancock USA All financial obligations under the group annuity contract are the sole obligation of John Hancock Life Insurance Company (U.S.A.). John Hancock is a division
More informationMapping of DBRS credit assessments under the Standardised Approach
30 October 2014 Mapping of DBRS credit assessments under the Standardised Approach 1. Executive summary 1. This report describes the mapping exercise carried out by the Joint Committee to determine the
More informationRetail Bankruptcy Prediction
American Journal of Economics and Business Administration 5 (1): 29-46, 2013 ISSN: 1945-5488 2013 Science Publication doi:10.3844/ajebasp.2013.29.46 Published Online 5 (1) 2013 (http://www.thescipub.com/ajeba.toc)
More informationTHE IMPACT OF INCORPORATING THE COST OF ERRORS INTO BANKRUPTCY PREDICTION MODELS L A. WEISS* 96/27/AC
THE IMPACT OF INCORPORATING THE COST OF ERRORS INTO BANKRUPTCY PREDICTION MODELS by L A. WEISS* 96/27/AC * Associate Professor of Accounting and Control, at INSEAD, Boulevard de Constance, Fontainebleau
More informationMethodology. Rating Canadian Split Share Companies and Trusts
Methodology Rating Canadian Split Share Companies and Trusts august 2012 CONTACT INFORMATION Jamie Feehely Managing Director Canadian Structured Finance +1 416 597 7312 jfeehely@dbrs.com Jiani Xi Assistant
More informationDebt markets. International Financial Markets. International Financial Markets
Debt markets Outline Instruments Participants Yield curve Risks 2 Debt instruments Bank loans most typical Reliance on private information Difficult to transfert to third party Government and commercial
More informationChapter 10. Chapter 10 Topics. What is Risk? The big picture. Introduction to Risk, Return, and the Opportunity Cost of Capital
1 Chapter 10 Introduction to Risk, Return, and the Opportunity Cost of Capital Chapter 10 Topics Risk: The Big Picture Rates of Return Risk Premiums Expected Return Stand Alone Risk Portfolio Return and
More informationCredit-Scoring Models and the Valuation of Fixed-Income Securities and Commercial Loans
Credit-Scoring Models and the Valuation of Fixed-Income Securities and Commercial Loans Edward I. Altman Max L. Heine Professor offinance Stern School ofbusiness New York University The trend toward securitization
More informationFOR THE YEAR ENDED 31 DECEMBER 2016
ALISTITHMAR FOR FINANCIAL SECURITIES AND BROKERAGE BUSINESS (ALISTITHMAR CAPITAL) PILLAR III DISCLOSURE REPORT FOR THE YEAR ENDED 31 DECEMBER 2016 JANUARY 2017 Table of Contents 1. OVERVIEW... 3 2. SCOPE
More informationSecuritisation Framework
Securitisation Framework Recent regulatory changes and market trend Zeshan Choudhry June 2011 Contents 1 Introduction and Background 2 Overview of Common Practice 3 Review of Securitisation Framework under
More informationRisk and Risk Management
Chapter 9: Risk and Risk Management 1 t By the end of this chapter you will be able to: Determine factors affecting business risk (CS) Explain the nature of risk management (SP) Describe types of financial
More informationCourse 103. Agenda. What is a challenge candidate? This is not a formal review course
Course 103 Investment Planning in 2019 Prepared With Kaplan Study Materials by: William Kline, Ph.D., CFA Agenda 1. CFP/Kaplan Continuing Education Material Overview 2. Investor Policy Statements Review
More informationCompany No H. MIZUHO BANK (MALAYSIA) BERHAD Incorporated in Malaysia
Company No. 923693 H MIZUHO BANK (MALAYSIA) BERHAD FOR THE FINANCIAL YEAR QUARTER 30 SEPTEMBER 2016 1.0 SCOPE OF APPLICATION The Pillar 3 Disclosure for financial reporting beginning 1 January 2010 is
More informationTaiwan Ratings. An Introduction to CDOs and Standard & Poor's Global CDO Ratings. Analysis. 1. What is a CDO? 2. Are CDOs similar to mutual funds?
An Introduction to CDOs and Standard & Poor's Global CDO Ratings Analysts: Thomas Upton, New York Standard & Poor's Ratings Services has been rating collateralized debt obligation (CDO) transactions since
More informationNike Example. EBIT = 2,433.7m ( gross margin expenses = )
Nike Example Background Calculations and Information: The following values are estimated from Nike's financial statements or the related notes to the financial statements and are used in some of the calculations
More information