Probability Of Distress Research Articles

Premature Ejaculation Results in Female Sexual Distress: Standardization and Validation of a New Diagnostic Tool for Sexual Distress

We measured premature ejaculation related female sexual distress using a new diagnostic tool, the Female Sexual Distress Scale-Revised-Premature Ejaculation questionnaire. In this large-scale, Internet based population study we evaluated 2,109 women in a stable relationship during the last 6 months. The 1,361 women in the premature ejaculation group had no female sexual disorder but the partner had premature ejaculation alone. The 748 controls had no female sexual disorder and a partner without premature ejaculation. We determined questionnaire content and discriminant validity, internal consistency and test-retest reliability. Multivariate logistic regression with propensity score reweighting was done to determine the clinical impact of demographics on the perception of sexual distress. The questionnaire was well understood. Internal consistency was greater than 0.90 and 0.84 in the premature ejaculation and control groups, respectively. Test-retest reliability was 0.82 (95% CI 0.72-0.87) and 0.85 (95% CI 0.79-0.92) in the premature ejaculation and control groups, respectively. The questionnaire had a high AUC of 0.90 (95% CI 0.89-0.91). The new cutoff score of 12 or greater had 79.1% sensitivity (95% CI 73.8-82.5), 99.5% specificity (95% CI 98.0-100.0), 99.3% positive predictive value (95% CI 98.7-100.0) and 67.9% negative predictive value (95% CI 64.2-73.2). Median questionnaire scores were significantly higher in the premature ejaculation group than in controls (20, 95% CI 19-21 vs 6, 95% CI 6-7, p <0.0001). Logistic regression adjusted and unadjusted by propensity score indicated that women in the premature ejaculation group had a 7.12 (95% CI 5.98-10.14, p <0.0001) to 9.83 (95% CI 7.94-12.15) greater probability of sexual distress than controls. The Female Sexual Distress Scale-Revised-Premature Ejaculation questionnaire fulfills psychometric requirements for measuring sexual distress related to partner sexual dysfunction.

Does the Local Rating Agency Provide ReliableCredit Ratings? An Empirical Analysis from an Emerging Market

In this article, the authors use both the stochastic frontier model (Battese and Coelli [1995]) and the discrete-time hazard model (DHM; Shumway [2001]) to determine whether the Taiwan Corporate Credit Risk Index (TCRI) is a good credit risk proxy for companies in Taiwan. They first apply the stochastic frontier model to study the relationship between the TCRI and technical inefficiency and then employ the DHM to study the relationship between the TCRI and financial distress. Finally, they compare the financial distress prediction performance of the DHM using the panel dataset solely based on the TCRI with that based on the well-known predictors in each of Altman [1968], Campbell, Hilscher, and Szilagyi [2008], Duffie, Saita, and Wang [2007], and Shumway [2001]. Their empirical results show that the larger the value of the TCRI, the lower the technical efficiency of the company and the larger the financial distress probability. Also, with the expanding rolling window approach, the DHM employing the panel dataset solely based on the TCRI has the best financial distress prediction performance among the five panel datasets, in the sense of yielding more accurate out-of-sample predicted number of financial distresses. Based on these empirical results, they conclude that the TCRI is a good credit risk proxy for companies in Taiwan.

Bank Bailouts and Moral Hazard: Evidence from Germany

We use a structural econometric model to provide empirical evidence that safety nets in the banking industry lead to additional risk taking. To identify the moral hazard effect of bailout expectations on bank risk, we exploit the fact that regional political factors explain bank bailouts but not bank risk. The sample includes all observed capital preservation measures and distressed exits in the German banking industry during 1995-2006. A change of bailout expectations by two standard deviations increases the probability of official distress from 6.6% to 9.4%, which is economically significant.

Strategic Risk Taking with Systemic Externalities

This paper studies the dynamic risk management of highly-levered financial institutions within a structural model of credit risk. We consider a context in which systemic default induces externalities that amplify the private cost of financial distress. This represents a source of strategic interaction and mandates an analysis of financial institutions' asset allocations in coalescence. We derive a unique strategic equilibrium in which two similar financial institutions adopt polarized and stochastic risk management, without sacrificing full diversification. Both institutions are concerned with maintaining sufficient wealth in adverse states. However, the conservative institution reduces its risk exposure, whereas the aggressive institution optimally gambles on positive and negative outcomes by taking long and short positions in risky securities over time. We further analyze the implications for debt pricing and distress probabilities.

Bankruptcy Risk, Costs and Corporate Diversification

This paper studies the impact of diversification on firms that file for Chapter 11 bankruptcy. Prior research suggests that diversification affects both the probability and costs of distress. Treating bankruptcy as a special case of distress, we find that diversification reduces the likelihood of bankruptcy and liquidation in Chapter 11, which is consistent with the coinsurance hypothesis. However, we observe higher bankruptcy costs as measured by time spent in Chapter 11 and inefficient segment investment for diversified firms. Our evidence is consistent with the idea that diversification provides benefits to managers in terms of job security rather than to firms. Our findings may help firms to make diversification decisions and creditors determine lending policies toward different forms of organizations.

Bankruptcy risk, costs and corporate diversification

This paper studies the impact of diversification on firms that file for Chapter 11 bankruptcy. Prior research suggests that diversification affects both the probability and costs of distress. Treating bankruptcy as a special case of distress, we find that diversification reduces the likelihood of bankruptcy and liquidation in Chapter 11, which is consistent with the coinsurance hypothesis. However, we observe higher bankruptcy costs as measured by time spent in Chapter 11 and inefficient segment investment for diversified firms. Our evidence is consistent with the idea that diversification provides benefits to managers in terms of job security rather than to firms. Our findings may help firms to make diversification decisions and creditors determine lending policies toward different forms of organizations.

Are Turnaround Specialists Special? An Examination of CEO Reputation and CEO Succession

This paper examines the economic consequences for firms that hire CEOs who have a reputation for being turnaround specialists. Abnormal returns around announcements that turnaround specialists have been hired as CEOs are significantly positive and more than 6 percentage points larger than the returns associated with announcements of other CEO successions. Significant differences exist in the attributes of firms that hire turnaround specialists as CEOs versus firms that hire others as CEOs in ways consistent with several hypotheses that I develop. Specifically, firms that hire turnaround specialists face a higher probability of distress, lower profit rates, and lower pre-succession stock returns than firms that hire others as CEOs. Firms that hire turnaround specialists reduce operating scale and show significant improvement in operating performance on average, indicating that the turnaround specialists’ reputation is commensurate with their abilities and managerial style.

Risk-Shifting Behavior at Commercial Banks Under Different Deposit Insurance Systems: Further Evidence from U.S. Markets

This paper provides further evidence regarding the effect of deposit insurance on the risk-shifting behavior at commercial banks in the United States. In particular, we compare the risk-shifting behavior of commercial banks before and after adopting the risk-based capital requirements in the U.S. market. To test the risk-shifting behaviors, we propose a new pricing model for the valuation of deposit insurance premium using a barrier option framework. We also estimate the unknown parameters using a maximum likelihood estimation method rather than Ronn and Verma’s (1986) two-equation approach. We find that the risk-shifting behaviors at commercial banks have reduced significantly but have not disappeared after the adoption of a risk-based deposit insurance system. The risk-shifting behavior at commercial banks still exists, especially for those banks with high risks or high financial distress probabilities. We find that the deposit insurance reform prevents large banks from shifting their risk to the deposit insurers as well.

Assessing probabilities of financial distress of banks in UAE

PurposeCommercial and Islamic banks are important players in the UAE financial market. However, little is known about their financial distress because these financial institutions usually resolve financial distress within their own organisations, which means that outsiders cannot explicitly observe distress. The purpose of the research is therefore to identify the main drivers of financial institutions' financial distress.Design/methodology/approachThe paper estimates a probability distress prediction model using the BankScope Database and the annual reports of UAE financial institutions submitted to UAE Security Exchange Authority. The paper also analyses the impact of macroeconomic information for forecasting financial institutions' financial distress.FindingsThe fundamentals of financial institutions in terms of cost income ratio, equity to total assets, total asset growth and ratio of loan loss reserve to gross loans (all these variables with a lag of one year) positively impacted the probability of financial distress in the next year. Recent findings for emerging economies have cast some doubt on the usefulness of macroeconomic information for financial institutions' risk assessment. Similar results are found for UAE financial institutions in predicting the probability of financial distress.Originality/valueThis is the first study to provide empirical evidence on the drivers of financial distress of commercial and Islamic banks in UAE during 2000‐2008, and to examine the extent of the financial distress that can be can be attributed to internal bank‐specific fundamental factors and external factors in the economy.

Capital Insufficiencies, Absortion Role of Management Inefficiencies and Financial Distress (or Bankruptcy) Probabilities – A Panel Data Probit Analysis from European Western Countries

The aim of this paper is to analyze financial distress probability supported by two proxies defined by short and long term capital insufficiencies as dependent variables. The conditions under which may be explained with the scholar explanatory variable sets constituted by financing, profitability, return volatilities and flexibility in financing and assets structure. Control variables are related to firm’s trade credit policy: trade credit duration gap and trade credit risk taking associated when facing different coverage ratios. In relation to the inclusion of trade credit duration gap and trade credit risk taking associated to different coverage ratios in basic model (1) finish to eliminate return on assets, return volatilities and trade credit risk taking to coverage ratio effects on short term capital insufficiency. Another important conclusion is that short term financing withdraw to itself financial costs, trade credit duration gap ratio and trade credit risk taking ratios negative effects to deteriorate short term capital insufficiency. In turn, equity negative impact represents an important autonomous effect to meet trade-off predictions on reducing short term capital insufficiency besides decreasing its coefficient magnitude after entering trade credit variables in the basic model (1). Negative working capital acts as a complement of short term financing positive effect on the deterioration of short term capital insufficiency that contributes to increase probability of financial distress (or bankruptcy). Only trade-off predictions are present in all control models when equity presents permanently a negative impact on short term capital insufficiency. More over, the inclusion of trade credit duration gap and trade credit risk taking associated to different coverage ratios in basic model (2) presented before eliminate return on sales volatility, negative working capital and trade credit risk taking ratios more related to core business coverage ratios impacts on long term capital insufficiency. Another important conclusion is that short term financing represents now a financing substitution role that contributes to decrease long term capital insufficiency. In turn, equity impact acts as the most important autonomous effect to meet trade-off predictions on strongly reducing long term capital insufficiency after entering trade credit variables in the basic model (2). Pecking order predictions are also respected by the negative impact of return on assets on long term capital insufficiency, confirming findings that no single theories provides a complete explanation for all aspects of the data analysed. Pecking order and trade off predictions are long term well running when trade credit control variables enter in long term capital insufficiency basic model. At last, FDL and Z-core models are substantially confirmed by results of ours long term capital insufficiency model.

Management ownership and corporate performance

This paper primarily used statistical methods to establish financial early-warning models that made it possible to predict in advance the probability of a company experiencing financial distress, and raised corporate performance. In the empirical analysis, there may be the first study that attempted to use financial ratios and non-financial ratios such as ratio of director and supervisor ownership stakes after pledging of shares 25% as variables to analyze cross-holding groups. The study used the K-S, M-U tests and Logit regressions model. When the ratio was less than 5%, the main indicators showing the impact of dispersion of equity ownership upon corporate performance were the following factors, financial structure, solvency, and operating performance indicators. At 5 - 25%, the significant variables were ROS, ROE, and EPS influenced the corporate performance, while ownership stake of directors and supervisors was concentrating, ownership stake of executive officers would increase. To increase ownership stake of institutions, and avoid switch of CPAs and establishing independent directors and supervisors, may strengthen corporate governance. Beyond 25%, establishing independent directors and supervisors may strengthen corporate governance. At 5 - 25%, ownership stake of directors and supervisors, and ownership stake of executive officers were concentrating, establishing independent directors and supervisors may be lower to the likelihood of financial distress, and raised the corporate performance. Empirical test of a managerial implication on non-financial variable acted as an observation corporate performance. It can provide a reference for stockholders to observe corporate performance, and then to decide investment strategies. Corporate ownership and management changed, the mean contribution of this paper was that switch of CPAs and establishing independent directors and supervisors may be lower the likelihood of financial distress. This paper would be useful to researchers or practitioners who were focusing on management ownership and corporate governance implementation. Key words: Corporate ownership, corporate governance, corporate performance, financial risk management.

Fraudulent Statements Disclosure And Financial Distress: A Discrete-Time Survival Analysis

&lt;p class="MsoNormal" style="text-justify: inter-ideograph; text-align: justify; line-height: 12pt; margin: 0in 36.1pt 0pt 0.5in; mso-layout-grid-align: none; mso-line-height-rule: exactly;"&gt;&lt;span style="font-family: Times New Roman;"&gt;&lt;span style="font-size: 10pt; mso-fareast-font-family: DFKai-SB; mso-font-kerning: 0pt;"&gt;This study &lt;/span&gt;&lt;span style="font-size: 10pt;"&gt;uses discrete-time survival analysis (DTSA) to&lt;/span&gt;&lt;span style="font-size: 10pt; mso-fareast-font-family: DFKai-SB; mso-font-kerning: 0pt;"&gt; examine the &lt;/span&gt;&lt;span style="font-size: 10pt;"&gt;influence of fraudulent statements disclosure on the probability of financial distress not only in the initial period subsequent to disclosure, but future periods as well. Evidence indicates DTSA is superior to logistic regression and extends a richer depiction of the probability after a first-time fraudulent statement disclosure. After &lt;/span&gt;&lt;span style="font-size: 10pt; mso-fareast-font-family: DFKai-SB; mso-font-kerning: 0pt; mso-bidi-font-weight: bold;"&gt;fraudulent statements disclosure,&lt;/span&gt;&lt;span style="color: black; font-size: 10pt; mso-fareast-font-family: DFKai-SB; mso-font-kerning: 0pt;"&gt; 24% of the reporting firms &lt;/span&gt;&lt;span style="font-size: 10pt; mso-fareast-font-family: DFKai-SB; mso-font-kerning: 0pt; mso-bidi-font-weight: bold;"&gt;experienced financial distress in Year 1, with the hazard function declines progressively in subsequent years. &lt;/span&gt;&lt;span style="font-size: 10pt;"&gt;We find total liability to total assets, &lt;/span&gt;&lt;span style="font-size: 10pt; mso-font-kerning: 0pt; mso-bidi-font-weight: bold;"&gt;directors and supervisors&amp;rsquo; stock pledged ratio, and CPA (Certified Public Accountant) change are definitely linked to financial distress probability (p-value &amp;lt;0.05). A DTSA model not only includes financial ratios, but also considers corporate governance variables to produce more accurate classification than those of alternative models. &lt;/span&gt;&lt;/span&gt;&lt;span style="font-size: 10pt; mso-fareast-font-family: DFKai-SB; mso-font-kerning: 0pt;"&gt;&lt;/span&gt;&lt;/p&gt;

Probabilities of Default and the Market Price of Risk in a Distressed Economy

We propose an original method to estimate the market price of risk under stress, which is needed to correct for risk aversion the CDS-implied probabilities of distress. The method is based, for simplicity, on a one-factor asset pricing model. The market price of risk under stress (the expectation of the market price of risk, conditional on it exceeding a certain threshold) is computed from the price of risk (which is the variance of the market price of risk) and the discount factor (which is the inverse of the expected market price of risk). The threshold is endogenously determined so that the probability of the price of risk exceeding it is also the probability of distress of the asset. The price of risk can be estimated via different methods, for instance derived from the VIX or from the factors in a Fama-MacBeth regression.

Probabilities of Default and the Market Price of Risk in a Distressed Economy

We propose an original method to estimate the market price of risk under stress, which is needed to correct for risk aversion the CDS-implied probabilities of distress. The method is based, for simplicity, on a one-factor asset pricing model. The market price of risk under stress (the expectation of the market price of risk, conditional on it exceeding a certain threshold) is computed from the price of risk (which is the variance of the market price of risk) and the discount factor (which is the inverse of the expected market price of risk). The threshold is endogenously determined so that the probability of the price of risk exceeding it is also the probability of distress of the asset. The price of risk can be estimated via different methods, for instance derived from the VIX or from the factors in a Fama-MacBeth regression.

Bank Bailouts, Interventions, and Moral Hazard

To test if safety nets create moral hazard in the banking industry, we develop a simultaneous structural two-equations model that specifies the probability of a bailout and banks' risk taking.We identify the effect of expected bailout probabilities on risk taking using exclusion restrictions based on regional political, supervisor, and banking market traits. The sample includes all observed capital preservation measures and distressed exits in the German banking industry during 1995-2006. The marginal effect of risk with respect to bailout expectations is 7.2 basis points. A change of bailout expectations by two standard deviations increases the probability of official distress from 6.2% to 9.9%. Only interventions directly targeting bank management and, to a lesser extent, penalties mitigate moral hazard. Weak interventions, such as warnings, do not reduce moral hazard.

財務比率、投資決策與公司績效之實證研究－全球金融海嘯前後比較

本文研究係首次嘗試探討全球金融海嘯發生前後，台灣上市公司之存活分析，找出影響公司績效之顯著變數並比較其差異，建立財務預警棋型，期能在公司發生財務危機前，提前預測出可能發生之機率，降低公司發生財務危機之可能性，進而提高公司績效，達事前預警與風險管理之效。實證分析上，利用財務比率變數作為解釋變數，以統計科學方法羅吉斯迴歸模型，建構出企業財務預警模式。實證結果發現，預測金融海嘯前後企業之財務危機，其前一至前三年金融海嘯前的預測竿確率分別為91.62%，93.55%，90.38%；金融海嘯後的預測準確率分別為92.90%，91.67%，100.00%。除前二年外，其餘兩個年度金融海嘯後之預測準確率較金融海嘯前顯然有提高，財務比率變數可為投資人做投資決策分析之參考指標；就金融海嘯後之財務資訊觀察，企業適度增加負債比率、降低自有資金比率，可改善財務結構；增加總資產週轉率，可增強企業之經管能力；增加借款依存度，可提升現金流量；增加內部保留比率，可提高公司獲利能力，則發生財務危機的機率將下降，進而提高公司績效。準此，本文之實證價值與管理意涵為財務風險管理、投資決策與財務預測。

Predicting banking distress in the EMEAP economies

This study develops a panel probit model to identify the leading indicators of banking distress and to estimate the banking distress probability for EMEAP economies. Macroeconomic fundamentals, currency crisis vulnerability, credit risks of banks and non-financial companies, asset price gaps, credit growth, and the occurrence of distress in other economies are found to be important leading indicators. The model is applied to stress test the Hong Kong banking sector. Simulation results suggest that compared with the period before the Asian financial crisis, the banking sector is currently more capable of withstanding shocks similar to those that occurred during the crisis.

Real estate prices and bank stability

Real estate prices can deviate from their fundamental value due to rigid supply, heterogeneity in quality, and various market imperfections, which have two contrasting effects on bank stability. Higher prices increase the value of collateral and net wealth of borrowers and thus reduce the likelihood of credit defaults. In contrast, persistent deviations from fundamentals may foster the adverse selection of increasingly risky creditors by banks seeking to expand their loan portfolios, which increases bank distress probabilities. We test these hypotheses using unique data on real estate markets and banks in Germany. House price deviations contribute to bank instability, but nominal house price developments do not. This finding corroborates the importance of deviations from the fundamental value of real estate, rather than just price levels or changes alone, when assessing bank stability.

Is there a Distress Risk Anomaly? Corporate Bond Spread as a Proxy for Default Risk

The standard measures of distress risk ignore the fact that firm defaults are correlated and that some defaults are more likely to occur in bad times. We use risk premium computed from corporate credit spreads to measure a firm’s exposure to systematic variation in default risk. Unlike previously used measures that proxy for a firm’s physical probability of default, credit spreads proxy for a risk-adjusted default probability and thereby explicitly account for the non-diversifiable component of distress risk. In contrast to prior findings in the literature, we find that stocks that have higher credit risk premia, that is stocks with higher systematic default risk exposures, have higher expected equity returns which are largely explained by the market factor. We confirm the robustness of these results by using an alternative systematic default risk factor for firms that do not have bonds outstanding. Consistent with the theoretical result in George and Hwang (2010), we also show that firms react to increases in their systematic default risk exposures by reducing their leverage, leading to lower physical probabilities of distress. Our results show no evidence of firms with high systematic default risk exposure delivering anomalously low returns.

Evaluation on financial risk and abnormal return: evidence from China’s listed companies

From 1998, China’s stock exchanges had classified listed companies as “Special Treatment” (ST) companies when these companies were involved in financial distress for the defined period. Principally, this study investigate that volatility the cumulative abnormal returns (CAR) before ST event, and interpret what factors will affect CAR. Using logistic regression constructs a financial distress prediction model to acquire distress probability. Furthermore, this paper explores pre-disclosure information (PDI) in advanced CAR regression model instead of traditional financial indexes. The main results indicate that the most obvious observation date of firms’ CAR is from pre 20 days relative to ST event, and both distress probability and proxy indicator for PDI are signifying in the model.