Merton (1974) suggested a structural model for default prediction which allows using timely information from the equity market. The literature describes several specifications to the application of the model, including methods presumably used by practitioners. However, recent studies demonstrate...

Purpose – The purpose of this paper is to assess the significance of the Merton distance-to-default (DD) in predicting defaults for a sample of listed Indian firms. Design/methodology/approach – The study uses a matched pair sample of defaulting and non-defaulting listed Indian firms. It...