An empirical investigation of firm longevity: A model of the ex ante predictors of financial distress.

详细信息   

• 作者：Turetsky ; Howard Fredric.
• 学历：Doctor
• 年：1997
• 导师：McEwen, Ruth Ann
• 毕业院校：Virginia Commonwealth University
• 专业：Business Administration, Accounting.;Economics, Commerce-Business.;Economics, Finance.
• ISBN：9780591340440
• CBH：9725212
• Country：USA
• 语种：English
• FileSize：7754636
• Pages：224

文摘

The current study examines the usefulness of accounting information in predicting corporate financial distress. Financial distress is viewed as a continuum that starts with a decline in firm health, indicated by a volatile decrease, from positive to negative, in cash flow from continuing operations, and progresses through four potential stages of increasing severity reflected by: (i) omission or reduction of dividend payments; (ii) technical default or loan default; (iii) troubled debt restructuring; and (iv) business failure. The continuum framework for the investigation of firm longevity is unique in that it observes firms, ex ante, at the onset of potential adversity and tracks their possible succession along a continuum of distress events. The intent is to develop risk profiles over time, utilizing accounting information, for firms exhibiting a sign of distress.;The study utilizes the techniques of survival analysis to examine firm longevity. Because survival analysis explicitly incorporates time as a variable, it can longitudinally track firms over a potential continuum of financial distress. Cox Proportional Hazards Model, a survival analysis regression model, provides information regarding the influence of certain risk dimensions and firm-specific attributes, designated by accounting measurements, on distressed firm survival over time.;The results suggest that the events of dividend reduction, default, and troubled debt restructuring are significantly associated with a potential succession to business failure. The event of default has a significant positive association with business failure; in contrast, a reduction in common stock dividends and a troubled debt restructuring are significant as constraints to potential business failure.;The findings suggest two predominant themes linking accounting information and financial distress. There is the inference that a firm's asset structure is a significant determinant of distressed firm survival. Whereas proportionately higher liquidity levels act as a deterrent to financial distress, asset structures composed of relatively high fixed asset sizes increase the risk of business failure. The results also suggest that larger, relative to sales dollars, is not necessarily better. Proportional increases in total sales, subsequent to events along this study's distress continuum, tend to magnify the hazard of business failure. This is particularly true subsequent to default.