Abstract
Work in finance suggests that changes in the probability of bankruptcy likely affect firm value by affecting perceptions of the cost of transacting with the firm. In this paper, accounting information from the balance sheet as well as the income statement is used in conjunction with Ohlson's (1980) bankruptcy prediction model to calculate unexpected changes in the probability of bankruptcy. For a sample of firms with a large estimated probability of bankruptcy sometime during the ten-year study period, unexpected changes in the probability of bankruptcy are useful in explaining security returns even after controlling for unexpected earnings.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
