Rev Account Stud (2012) 17:610–611 DOI 10.1007/s11142-012-9198-3 Itzhak Venezia Published online: 12 July 2012 Springer Science+Business Media, LLC 2012 This discussion starts by describing what I like about the paper, then it expounds on the ‘‘big picture’’ lessons I have drawn from it, and concludes with thoughts about where this research may lead us. This paper spans many areas—options theory, bankruptcy predictions, efﬁcient markets, and investment theory—and sheds light on all of them. The paper integrates accounting variables and options theory to arrive at superior bankruptcies predictions, and then uses these predictions to test the efﬁciency of credit markets. The paper makes several important contributions. It provides new methods for bankruptcy predictions, it demonstrates the usefulness of credit spreads in these predictions, it explores the efﬁciency of credit markets, and it conﬁrms the usefulness of accounting information in investments in credit markets. The paper’s main point is that credit markets are inefﬁcient and that apparently investors fail to take full advantage of the information inherent in credit spreads. The authors present several estimates of credit spreads that can predict future credit spreads, thus opening the potential for above normal proﬁts. While not all the estimates of credit spreads the
Review of Accounting Studies – Springer Journals
Published: Jul 12, 2012
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