This study explores whether taking into account variables for real earnings management improves specification of the default prediction model based on the Z-score methodology for Chinese listed companies. We demonstrate that the Z-score model proposed by Altman (1968) overestimates the survival...

This study examines the extent to which incorporating current-period and/or cumulative real activities earnings management in default models enhances their predictability. Aiming at Altman's (1968) Z-score as well as Ohlson's (1980) O-score predictors, such adjustments help mitigate the...

The violation of regulatory targets is potentially costly for banks. To the extent that managers have discretion in setting loan loss provisions, they have strong incentives to use provisioning to manage regulatory capital and thereby reduce the costs of violating regulatory minimum targets....