Financial distress and bankruptcy prediction using accounting, market and macroeconomic variables

This thesis investigates the information content of different types of variables in the field of financial distress/default prediction. Specifically, the thesis tests empirically, for the first time, the utility of combining accounting data, market-based variables and macroeconomic indicators to explain corporate credit risk. Models for listed companies in the United Kingdom are developed for the prediction of financial distress and corporate failure. The models used a combination of accounting data, stock market information, proxies for changes in the macroeconomic environment, and industry controls. Furthermore, novel finance-based and technical definitions of firm distress and failure are introduced as outcome variables. The thesis produced binary and polytomous models with enhanced predictive accuracy, practical value, and macro dependent dynamics that have relevance for stress testing. The results unambiguously show the advantages, in terms of predictive accuracy and timeliness, of combining these types of variables. Unlike previous research works that employed discrete choice, non-linear regression methodologies, this thesis provided new evidence on the effects of the different types of variables on the probability of falling into each of the individual outcomes (e.g., financial distress, corporate failure). The analysis of graphic representations of changes in predicted probabilities, a primer in the field of risk modelling, offered new insights with regard to the behaviour of the vectors of predicted probabilities following a given change in the magnitude of a specific covariate. Additionally, and in line with the main area of study, the thesis provides historical evidence on the types of variables and the information sharing mechanisms employed by American and British investors and financial institutions to assess the riskiness of individuals, businesses and fixed-income instruments before the emergence of modern institutions such as the credit rating agencies and prior to the development of complex statistical models, filling thus a crucial gap in the credit risk literature

Information asymmetry, agency costs, and payout policies:An international analysis of IFRS adoption and the global financial crisis

Information asymmetry can affect the propensity of firms to pay dividends directly and indirectly by reducing the agency costs of free cash flow (FCF). However, designing a research framework to identify whether information asymmetry or agency cost directly explains the propensity to pay dividends is challenging, as both are partially endogenous. To overcome this challenge, this study investigates the role of two independent external shocks in explaining the propensity of firms to pay dividends. We use the mandatory adoption of International Financial Reporting Standards (IFRS) as an information asymmetry–reducing event and the global financial crisis (GFC) as an agency cost–reducing event to disentangle the effects of information asymmetry and agency costs. Using a large international sample of more than 100,000 firm-year observations and a matched sample of more than 35,000 observations, we find that the propensity to pay dividends declined after the mandatory adoption of IFRS and then declined further due to the economic shock of the GFC. We also provide evidence that firms facing high information asymmetry and high agency costs have a lower propensity to pay dividends because of the combined effects of IFRS adoption and the GFC. These findings suggest that the agency costs of FCF are more directly relevant in explaining dividend payout policy.</p

Information asymmetry, agency costs, and payout policies:An international analysis of IFRS adoption and the global financial crisis

Information asymmetry can affect the propensity of firms to pay dividends directly and indirectly by reducing the agency costs of free cash flow (FCF). However, designing a research framework to identify whether information asymmetry or agency cost directly explains the propensity to pay dividends is challenging, as both are partially endogenous. To overcome this challenge, this study investigates the role of two independent external shocks in explaining the propensity of firms to pay dividends. We use the mandatory adoption of International Financial Reporting Standards (IFRS) as an information asymmetry–reducing event and the global financial crisis (GFC) as an agency cost–reducing event to disentangle the effects of information asymmetry and agency costs. Using a large international sample of more than 100,000 firm-year observations and a matched sample of more than 35,000 observations, we find that the propensity to pay dividends declined after the mandatory adoption of IFRS and then declined further due to the economic shock of the GFC. We also provide evidence that firms facing high information asymmetry and high agency costs have a lower propensity to pay dividends because of the combined effects of IFRS adoption and the GFC. These findings suggest that the agency costs of FCF are more directly relevant in explaining dividend payout policy.</p

Seguridad y violencia en el Estado de México. Nota generales para un acercamiento

Este libro tiene como uno de sus objetivos principales impulsar un ejercicio académico de tipo prevención del tema seguridad y violencia en el estado de México a través de las notas generales para un acercamiento

Polytomous response financial distress models: The role of accounting, market and macroeconomic variables

We apply polytomous response logit models to investigate financial distress and bankruptcy across three states for UK listed companies over a period exceeding 30 years and utilising around 20,000 company year observations. Results suggest combining accounting, market and macroeconomic variables enhances the performance, accuracy and timeliness of models of corporate credit risk. Models produced contribute to the prediction and early warning systems literature by investigating the distress/failure process with enhanced granularity. We employ marginal effects to assess individual covariates' impact on the probability of falling into each state. The new insights on individual risk factors are confirmed by analysis of vectors of changes in predicted probabilities of falling into a state of financial distress and corporate failure following changes in the level of individual covariates. Resulting models provide a better understanding of different risk factors and can help practitioners detect financial distress and failure in a timely fashion

Impacts of the Tropical Pacific/Indian Oceans on the Seasonal Cycle of the West African Monsoon

The current consensus is that drought has developed in the Sahel during the second half of the twentieth century as a result of remote effects of oceanic anomalies amplified by local land–atmosphere interactions. This paper focuses on the impacts of oceanic anomalies upon West African climate and specifically aims to identify those from SST anomalies in the Pacific/Indian Oceans during spring and summer seasons, when they were significant. Idealized sensitivity experiments are performed with four atmospheric general circulation models (AGCMs). The prescribed SST patterns used in the AGCMs are based on the leading mode of covariability between SST anomalies over the Pacific/Indian Oceans and summer rainfall over West Africa. The results show that such oceanic anomalies in the Pacific/Indian Ocean lead to a northward shift of an anomalous dry belt from the Gulf of Guinea to the Sahel as the season advances. In the Sahel, the magnitude of rainfall anomalies is comparable to that obtained by other authors using SST anomalies confined to the proximity of the Atlantic Ocean. The mechanism connecting the Pacific/Indian SST anomalies with West African rainfall has a strong seasonal cycle. In spring (May and June), anomalous subsidence develops over both the Maritime Continent and the equatorial Atlantic in response to the enhanced equatorial heating. Precipitation increases over continental West Africa in association with stronger zonal convergence of moisture. In addition, precipitation decreases over the Gulf of Guinea. During the monsoon peak (July and August), the SST anomalies move westward over the equatorial Pacific and the two regions where subsidence occurred earlier in the seasons merge over West Africa. The monsoon weakens and rainfall decreases over the Sahel, especially in August.Peer reviewe

Optimasi Portofolio Resiko Menggunakan Model Markowitz MVO Dikaitkan dengan Keterbatasan Manusia dalam Memprediksi Masa Depan dalam Perspektif Al-Qur`an

Risk portfolio on modern finance has become increasingly technical, requiring the use of sophisticated mathematical tools in both research and practice. Since companies cannot insure themselves completely against risk, as human incompetence in predicting the future precisely that written in Al-Quran surah Luqman verse 34, they have to manage it to yield an optimal portfolio. The objective here is to minimize the variance among all portfolios, or alternatively, to maximize expected return among all portfolios that has at least a certain expected return. Furthermore, this study focuses on optimizing risk portfolio so called Markowitz MVO (Mean-Variance Optimization). Some theoretical frameworks for analysis are arithmetic mean, geometric mean, variance, covariance, linear programming, and quadratic programming. Moreover, finding a minimum variance portfolio produces a convex quadratic programming, that is minimizing the objective function ðð¥with constraintsð ð 𥠥 ðandð´ð¥ = ð. The outcome of this research is the solution of optimal risk portofolio in some investments that could be finished smoothly using MATLAB R2007b software together with its graphic analysis