We estimate and test several default risk models using new and unique data on corporate defaults in the German stock market. While defaults were extremely rare events in the 1990s, they have been a characteristic feature of the German stock market since the early 2000s. We apply the structural...

Purpose: Previous research on the relationship between a firm’s distress risk and future stock returns produces inconsistent results. This study attempts to explain the conflicting results of earlier studies by showing that systematic distress risk leads to positive rewards, while unsystematic...

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...