An Empirical Investigation of Firm Longevity: A Model of the Ex Ante Predictors of Financial Distress

An Empirical Investigation of Firm Longevity: A Model of the Ex Ante Predictors of Financial... Empirical models of a potential failure process that incorporate distress states between the extremes of corporate health and bankruptcy are uncommon. We depict financial distress as a series of financial events that reflect varied stages of corporate adversity. Our intent is to provide information regarding the influence of certain risk dimensions and firm-specific attributes on distressed firm survival over time. Within a theorized distress framework, we utilize the techniques of survival analysis to longitudinally track firms, grouped a priori according to an initial decline in operating cash flows. We find that the event of default has a significant positive association with business failure. Further, we document that the significant accounting covariates tend to change conditional on a firm having progressed through the diverse stages of distress. These findings accentuate the heterogeneous nature of financial distress and potential business failure. Review of Quantitative Finance and Accounting Springer Journals

An Empirical Investigation of Firm Longevity: A Model of the Ex Ante Predictors of Financial Distress

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Kluwer Academic Publishers
Copyright © 2001 by Kluwer Academic Publishers
Finance; Corporate Finance; Accounting/Auditing; Econometrics; Operation Research/Decision Theory
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