Financial institutions and academic researchers utilize bankruptcy prediction models to assess distress risk. However … obligations outside of bankruptcy, and (v) default frequency varies significantly over economic life cycles. Thus, relying on … bankruptcy data alone to calibrate and validate these models can be problematic. We take a simpler approach by relying on the …

In this paper, we evaluate an alternative approach for bankruptcy prediction that measures the financial healthiness of … contemporary corporate bankruptcy models with the probability of bankruptcy derived from the Leland-Toft model, such as Altman …

We estimate probabilities of bankruptcy for 5,784 industrial firms in the period 1988-2002 in a model where common …-specific bankruptcy barriers are simultaneously backed out from the prices of traded equity. Implied barriers are significantly positive … possibility of early bankruptcy resolves some of the well-documented miscalibration. We also find that accounting-based measures …