Review of Categorical Models for Classification Issues in Accounting and Finance

Review of Categorical Models for Classification Issues in Accounting and Finance Recent studies have extensively used the logit or probit models for classification problems in accounting and finance. More than 289 articles in prestigious journals have used these or similar methods from 1989 through 1996. This paper reviews several categorical techniques and compares the performance of logit or probit with alternative procedures. Intuitive and mathematical explanations of how the models examined differ in terms of underlying assumptions and other attributes are provided. The alternative techniques are applied to two substantive research questions: predicting bankruptcy and auditors' consistency judgements. Four empirical criteria provide some evidence that the exponential generalized beta of the second kind (EGB2), lomit, and burrit (all new to the accounting and finance literature) improve the log-likelihood functions, and the explanatory power, compared with logit and other models. EGB2, lomit and burrit also provide significantly better classifications and predictions than logit and other techniques. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Quantitative Finance and Accounting Springer Journals

Review of Categorical Models for Classification Issues in Accounting and Finance

Loading next page...
 
/lp/springer_journal/review-of-categorical-models-for-classification-issues-in-accounting-4gWsSVxbp0
Publisher
Kluwer Academic Publishers
Copyright
Copyright © 1999 by Kluwer Academic Publishers
Subject
Finance; Corporate Finance; Accounting/Auditing; Econometrics; Operation Research/Decision Theory
ISSN
0924-865X
eISSN
1573-7179
D.O.I.
10.1023/A:1008348403869
Publisher site
See Article on Publisher Site

Abstract

Recent studies have extensively used the logit or probit models for classification problems in accounting and finance. More than 289 articles in prestigious journals have used these or similar methods from 1989 through 1996. This paper reviews several categorical techniques and compares the performance of logit or probit with alternative procedures. Intuitive and mathematical explanations of how the models examined differ in terms of underlying assumptions and other attributes are provided. The alternative techniques are applied to two substantive research questions: predicting bankruptcy and auditors' consistency judgements. Four empirical criteria provide some evidence that the exponential generalized beta of the second kind (EGB2), lomit, and burrit (all new to the accounting and finance literature) improve the log-likelihood functions, and the explanatory power, compared with logit and other models. EGB2, lomit and burrit also provide significantly better classifications and predictions than logit and other techniques.

Journal

Review of Quantitative Finance and AccountingSpringer Journals

Published: Sep 30, 2004

References

You’re reading a free preview. Subscribe to read the entire article.


DeepDyve is your
personal research library

It’s your single place to instantly
discover and read the research
that matters to you.

Enjoy affordable access to
over 18 million articles from more than
15,000 peer-reviewed journals.

All for just $49/month

Explore the DeepDyve Library

Search

Query the DeepDyve database, plus search all of PubMed and Google Scholar seamlessly

Organize

Save any article or search result from DeepDyve, PubMed, and Google Scholar... all in one place.

Access

Get unlimited, online access to over 18 million full-text articles from more than 15,000 scientific journals.

Your journals are on DeepDyve

Read from thousands of the leading scholarly journals from SpringerNature, Elsevier, Wiley-Blackwell, Oxford University Press and more.

All the latest content is available, no embargo periods.

See the journals in your area

DeepDyve

Freelancer

DeepDyve

Pro

Price

FREE

$49/month
$360/year

Save searches from
Google Scholar,
PubMed

Create lists to
organize your research

Export lists, citations

Read DeepDyve articles

Abstract access only

Unlimited access to over
18 million full-text articles

Print

20 pages / month

PDF Discount

20% off