We develop a structural equilibrium model with business cycles and use it to examine the economic implications of voluntary filing for bankruptcy. We find that conflict of interests that arises from the voluntary filing option of Chapter 11 causes higher ex-ante losses in firm value in...

Bank’s major approach in her internal rating system is credit scoring valuation which focused on corporates’ idiosyncratic risks and based on their financial indexes. Hence, an influence on corporates’ credit risks by business variation is not considered in her system. We model the effect...

In this paper, we use accounting fundamentals to measure systematic risk of distress. Our main testable prediction—that this risk increases with the probability of recessionary failure, P(R|F)—is based on a stylized model that guides our empirical analyses. We first apply the lasso method to...

We propose a model that jointly determines the capital structure and investment decisions taking business cycle and debt maturity into account. Namely, the firm can switch the diffusion regime of asset value, which involves switching costs, and the state of the economy that generates cyclical...

We study the sensitivity of the realised loss-given-default (LGD) to macroeconomic conditions by exploring Global Credit's confidential dataset on observed cash flows from defaulted loans. Given the prolonged duration of loan recovery, spanning several years, and the potential for macroeconomic...

We use a vector error correction model to study the long-term relationship between aggregate expected default frequency and the macroeconomic development, i.e. CPI, industry production and short-term interest rate. The model is used to forecast the median expected default frequency of the...

This study theoretically examines under what circumstances economic cycles advance or deter corporate defaults. We find that an ongoing catastrophe dominates other macroeconomic conditions and forces corporate failures. In contrast, when a catastrophe is unlikely, a constant economy permits...

This paper studies the relationship between macroeconomic fluctuations and corporate defaults while conditioning on industry affliation and an extensive set of firm-specific factors. By using a panel data set for virtually all incorporated Swedish businesses over 1990-2009, a period which...

This paper studies the relation between macroeconomic fluctuations and corporate defaults while conditioning on industry affiliation and an extensive set of firm-specific factors. Using a logit approach on a panel data set for all incorporated Swedish businesses over 1990-2002, we find strong...

We use a vector error correction model to study the long-term relationship between aggregate expected default frequency and the macroeconomic development, i.e. CPI, industry production and short-term interest rate. The model is used to forecast the median expected default frequency of the...