Using a structural model of default, we construct a measure of systemic default defined as the probability that many firms default at the same time. We account for correlations in defaults between firms through exposures to common shocks. The systemic default measure spikes during recession...

Investors invest in a company after proper evaluation of the financial condition. If the company's financial condition is not satisfactory and volatile then the investors would change their decision of investment in those firms. In order to analyse a company’s financial performance an investor...

Prior work demonstrates that neither Altman Z-score nor Merton distance-to-default predict bankruptcy in unbalanced datasets. I show that one-year stock returns are a powerful bankruptcy predictor. In U.S. public firms from December 31, 1995 through December 31, 2021 that are members of the...