Financial Ratios, Size, Industry and Interest Rate Issues in Company Failure: An Extended Multidimensional Scaling Analysis

Three-way multidimensional scaling methods are used to study the differences between UK failed and continuing companies from 1993 to 2001. The technique allows for visual representations of the results, so that qualitative information can be brought to bear when judging the health of a company. It is shown that it is important to take into account company size and area of activity. Results also suggest that the ratio structure of the companies varies between years in response to changes in the interest rates, suggesting that the frontier between failing and continuing firms moves in response to the economic cycle

Earnings quality in ex-post failed firms.

This paper analyses earnings quality in ex-post failed firms. Using a large sample of UK bankrupt firms, we find that failed firms manage earnings upwards in the four years prior to failure. This manipulation is achieved in two ways: (1) through accounting (accruals) manipulation; and (2) by implementing real operating actions that deviate from normal practice. We show that these two types of manipulation lead to reduced earnings reliability. We use conditional conservatism as a proxy for reliability, as prior literature links conditional accounting conservatism to better governance and positive economic outcomes. Our results show that conditional conservatism decreases substantially in the years prior to failure. Finally, we show that accruals manipulation is more pronounced in ex-post bankrupt firms with low ex-ante probability of failure, and that ex-post bankrupt firms with high ex-ante failure probability, having likely exhausted the opportunities for accrual manipulation, manipulate real operations more aggressivelyFirm failure; Accruals management; Real earnings management; Conditional conservatism; Earnings quality; Bankruptcy;

旨在促进离岸资源开发领域FDI的区域合作

Country-specific regulatory limitations and geopolitical challenges do not allow countries in the Eastern Mediterranean to reach their full potential. The establishment of a Scientific Forum, that would encourage regional cooperation through interactions and recommendations, could lower risks and enhance FDI in the exploration and development of offshore resources

Earnings quality in ex-post failed firms

This paper analyses earnings quality in ex-post failed firms. Using a large sample of UK bankrupt firms, we find that failed firms manage earnings upwards in the four years prior to failure. This manipulation is achieved in two ways: (1) through accounting (accruals) manipulation; and (2) by implementing real operating actions that deviate from normal practice. We show that these two types of manipulation lead to reduced earnings reliability. We use conditional conservatism as a proxy for reliability, as prior literature links conditional accounting conservatism to better governance and positive economic outcomes. Our results show that conditional conservatism decreases substantially in the years prior to failure. Finally, we show that accruals manipulation is more pronounced in ex-post bankrupt firms with low ex-ante probability of failure, and that ex-post bankrupt firms with high ex-ante failure probability, having likely exhausted the opportunities for accrual manipulation, manipulate real operations more aggressivelyEuropean Commission INTACCT Research Training Network (MRTNCT- 2006-035850), and the Spanish Ministry of Science and Innovation (ECO2008-0638/ECON and SEJ2007- 67582/ECON and SEJ2005-08644/ECO)Publicad

Multivariate techniques in corporate failure prediction

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Multivariate techniques in corporate failure prediction

This thesis introduce Multidimensional Scaling (MDS) to explain and predict the corporate failure event.  After critically reviewing the relevant literature, it is argued that refinements of existing models, which are mostly mechanical, and the construction of new ones using similar techniques, are likely to yield nothing more than marginal benefits to the users.  However, users will benefit from the development of statistically sound but easy-to-comprehend models, which will assist them in making an informed decision regarding the financial health of the companies in question.  Scaling techniques enable the construction of robust and user-friendly bankruptcy models as they offer pictorial representations of the results, via which the user can visualise the underlying relationships in the data.  The research begins with the application of logit analysis and neural networks (NNs), and the investigation of the usefulness of operating cash flows in bankruptcy models, reflecting the recent popularity of NNs, the increased interest in cash flow reporting in the UK and the scarcity of recent UK failure studies.  The NN model is not found to be superior to the logit model and empirical evidence shows that operating cash flow variables can add significantly to the explanatory power of accrual-based models. The second study of the thesis proposes classic MDS as an alternative to conventional techniques.  The MDS approach has the advantage of visualising the main features of the data in the form of statistical maps, which lend themselves to intuitive interpretation, while keeping a strong theoretical basis.  The methodology is demonstrated using a recent sample of UK companies, while a future-dated holdout sample is employed to illustrate how MDS can aid practitioners when assessing the financial health of a company. Three-way scaling analysis is introduced in the third study to examine the differences in the financial structure of a large sample of UK companies over a number of years.  The results indicate that the most important determinants of a company’s financial health are its capital structure, the profitability/operating cash flow position and the ratios that relate to the shareholders’ return.</p

Regional cooperation to enhance FDI in the development of offshore resources

Country-specific regulatory limitations and geopolitical challenges do not allow countries in the Eastern Mediterranean to reach their full potential. The establishment of a Scientific Forum, that would encourage regional cooperation through interactions and recommendations, could lower risks and enhance FDI in the exploration and development of offshore resources