Financial Distress Comparison Across Three Global Regions

Globalization has precipitated movement of output and employment between regions. We examine factors related to corporate financial distress across three continents. Using a multidimensional definition of financial distress we test three hypotheses to explain financial distress using historical financial data. A null hypothesis of a single global model was rejected in favor of a fully relaxed model which created individual financial distress models for each region. This result suggests that despite other indications of worldwide convergence, international differences in accounting rules, lending practices, managements skill levels, and legal requirements among others has kept corporate decline from becoming commoditized

Understanding Differences Between Financial Distress and Bankruptcy

For the most part, research purporting to address the issue of financial distress has actually studied samples of bankrupt companies. Financial distress and bankruptcy are different. In contrast, this paper starts with a sample of companies that are financially distressed but not yet bankrupt. The sample was obtained by screening the Compustat industry database with a three-tiered identification system. The screen bifurcated companies into financially and non-financially distressed groups. A multi-tiered screen reduces the incidence of mistakenly identifying a non-distressed company as financially distressed. The paper then compares factors indicating the likelihood of future bankruptcies to those indicating future financial distress. To do this, an early warning financial-distress model was developed and compared to a methodologically similar existent model of bankruptcy. The final financial distress model included only one variable present in the bankruptcy model and four new variables. The limited overlap of explanatory factors between the models questions the similarity of financial distress and bankruptcy. Statistical tests lend support to the notion that the bankruptcy process is not just a continuation of a downward spiraling cycle of financial distress. Our hypothesis is that financial distress is something that happens to companies as a consequence of operating decisions or external forces while bankruptcy is something that companies choose to do to protect their assets from creditors

A Re-examination of the Effectiveness of the Bankruptcy Process

As an increasing number of companies go bankrupt, society grows concerned with the process's efficacy. In contrast to previous research, we find that relatively healthy companies emerge from bankruptcy as evidenced by their operating and equity performance post bankruptcy. While we find a substantial degree of variation in the forecast accuracy of sales, EBIT and net income, we find that forecast errors are not statistically significant and are smaller than had been thought. We provide evidence to support the argument that the economy's health affects operating and equity outcomes post bankruptcy. Copyright Blackwell Publishers Ltd 2002.

Understanding Differences Between Financial Distress and Bankruptcy

For the most part, research purporting to address the issue of financial distress has actually studied samples of bankrupt companies. Financial distress and bankruptcy are different. In contrast, this paper starts with a sample of companies that are financially distressed but not yet bankrupt. The sample was obtained by screening the Compustat industry database with a three-tiered identification system. The screen bifurcated companies into financially and non-financially distressed groups. A multi-tiered screen reduces the incidence of mistakenly identifying a non-distressed company as financially distressed. The paper then compares factors indicating the likelihood of future bankruptcies to those indicating future financial distress. To do this, an early warning financial-distress model was developed and compared to a methodologically similar existent model of bankruptcy. The final financial distress model included only one variable present in the bankruptcy model and four new variables. The limited overlap of explanatory factors between the models questions the similarity of financial distress and bankruptcy. Statistical tests lend support to the notion that the bankruptcy process is not just a continuation of a downward spiraling cycle of financial distress. Our hypothesis is that financial distress is something that happens to companies as a consequence of operating decisions or external forces while bankruptcy is something that companies choose to do to protect their assets from creditors.financial distress, early warning model, renewal, Financial Economics, G30, G33,

Referential redundancy and the integration of verbal information

In two experiments, college students read pairs of messages describing an actor's portrayal of a particular emotion. They were then asked to identify the one of 24 target photographs about which each message-pair was written. When the respondents' selections were made immediately after reading the message-pair, accuracy was inversely related to the redundancy of the two passages. Performance on the nonredundant pairs deteriorated relatively rapidly, however, when an arithmetic task was interpolated between the receipt of the message-pair and the presentation of the referent array from which the target was to be selected; by contrast, the redundant pairs elicited a stable performance pattern that was essentially unaffected by the interpolated arithmetic task. In a third experiment, each subject served as a transmitter. He was shown a target-photograph together with a "given" description and was asked to "supplement" it with a second description to produce a message-pair that would enable a recipient to identify the proper target-photograph in a decoding task of the type used in Experiments I and II. Given a choice between two "additional" descriptions that produced identical hit-rates when presented singly, respondents generally selected the passage that was more redundant with the "given" description.Peer Reviewedhttp://deepblue.lib.umich.edu/bitstream/2027.42/21860/1/0000264.pd