While using the binary quantile regression (BQR) model, we establish a hybrid bankruptcy prediction model with dynamic loadings for both the accounting-ratio-based and market-based information. Using the proposed model, we conduct an empirical study on a dataset comprising of default events...

This paper examines the performance of two commonly applied bankruptcy prediction models, the accounting ratio-based Altman Z-Score model, and the structural Distance to Default model which currently underlies Morningstar's Financial Health Grade for public companies (Morningstar 2008)....

We develop a model in which, in order to provide managerial incentives, it is optimal to have costly bankruptcy. If benevolent governments can commit to their policies, it is optimal not to interfere with private contracts. Such policies are time inconsistent in the sense that, without...

We estimate the costs of financial distress prior to default (pre-default costs) separately from the loss incurred at default (the loss given default) using a dynamic trade-off model of capital structure. We document that pre-default costs are on average equal to 6.5% of firm value per year. We...

We investigate how idiosyncratic lender shocks impact corporate investment. Lenders with recent default experience write stricter loan contracts, leading to a reduction in real investment for borrowing firms. The decline in investment is not attributable to loan riskiness, borrower's agency...

Distance to default (DTD) is a strong predictor of default risk derived from structural models. This paper specifies a stressed version of DTD ("stressed DTD'') to measure time-varying corporate default risk in the event that a systematic stress scenario occurs. Compared with the ordinary DTD,...

This paper shows that forward default intensities in the Black and Cox (1976) model of corporate default can be expressed in terms of the Mills Ratio (Mills, 1926). The behavior of the forward default intensity and hence the survivorship functions then follows from inequalities that are...

This paper investigates the impact of recourse on the workout process of portfolio commercial mortgage loans. A generalized model of mortgage workout with stochastic property value appreciation is developed and closed form expressions are derived for the relations between recourse and credit...