The paper examines the interpretation of firms' investment-cash flow sensitivity as an artifact of financial market imperfection. Two alternative explanations of the financial constraints are compared. One is based on informational problems (asymmetric information). The other focuses on limited...

Net-worth covenants, as introduced by Black and Cox (1976), provide the firm’s bondholders with the right to force reorganization or liquidation if the value of the firm falls below a certain threshold. In the event of default, however, many bankruptcy codes stipulate an automatic stay of...

This paper analyses the determinants of banks’ loan loss allowances for samples of US banks and three non-US samples: a group of 21 countries, Canada and Japan. The model includes fundamental (or non-discretionary) determinants of the allowance such as non-performing loans, and discretionary...

Eine positive Fortbestehensprognose eines Unternehmens beinhaltet eine mit überwiegender Wahrscheinlichkeit erwartete nachhaltige Zahlungsfähigkeit. In dem Beitrag „Die Fortbestehensprognose – Rechtliche Anforderungen und ihre betriebswirtschaftlichen Grundlagen“ der Verfasser in WPg...

This working paper aims at improving the comparability of forecast quality measures of insolvency prediction studies. For this purpose, in a first step commonly used accuracy measures for categorial, ordinal and cardinal insolvency predictions are presented. It will be argued, that ordinal...

This paper graphically demonstrates the significant impact of the observed financial market persistence, i.e., long term memory or dependence, on European option valuation. Many empirical researchers have observed non-Fickian degrees of persistence or long memory in the financial markets...

This paper examines the determinants of the rate of forced insolvency in New Zealand. The study incorporates two key features. First, we use regional as well as national data to explain insolvencies. The data cover six regions which have had a variety of economic experiences over the sample...

We present a model of bank passivity and regulatory failure. Banks with low equity positions have more incentives to be passive in liquidating bad loans. We show that they tend to hide distress from regulatory authorities and are ready to offer a higher rate of interest in order to attract...

Municipalities financial distress (which we refer as financial vulnerability) is a recurrent concern of French political life. However, there is no universal and unique definition of financial distress. This paper presents a synthesis of some possible definitions and display the real importance...