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Activity Number:
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357
- Contributed Poster Presentations: Business and Economic Statistics Section
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Type:
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Contributed
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Date/Time:
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Tuesday, July 30, 2019 : 10:30 AM to 12:20 PM
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Sponsor:
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Business and Economic Statistics Section
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Abstract #306780
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Title:
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Determinants of Corporate Bankruptcy: Identification and Uncertainty
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Author(s):
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TIANHAI ZU* and Yan Yu and Yichen Qin
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Companies:
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University of cincinnati and University of Cincinnati and University of Cincinnati
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Keywords:
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Corporate bankruptcy prediction;
Variable selection;
Uncertainty;
Model confidence bound;
Diagnostic tool
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Abstract:
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Corporate bankruptcy is both socially influential and economically detrimental. Hence, research in corporate bankruptcy is critically important. Some natural questions arise: 1) What are important determinants of corporate bankruptcy? 2) How reliable are the determinants identified? This paper explores identifying important determinants and investigating their uncertainly. We build a comprehensive bankruptcy database including as many determinants proposed in the literature as possible merging both accounting statements and market information. We explore various variable selection tools and find that important determinants include both market variables and accounting ratios. More importantly, we construct a model confidence bound (MCB) to measure the reliability of the selected determinants. We further propose a graphical representation of the model selection distribution and define deviation and skewness measures to facilitate an understanding on how reliable the identified important determinants are. We find that among eight predictive variables in Campbell et al. (2008), stock price is identified with high confidence, while stock excess return is included within the MCB.
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Authors who are presenting talks have a * after their name.
