ON LINEAR DISCRIMINATION WITH ACCOUNTING RATIOS

Much research in Accounting and Finance is concerned with using the linear discriminant function (LDF) to model accounting-based ratios to predict financial events and other variables. Little attention has been given to the conditions under which the model is optimal, and to any resultant biases in model output associated with accounting ratios that do not meet optimality. This study lists conditions for LDF optimality, and discusses the potential problems when accounting numbers do not meet such conditions. This knowledge is extended by reported results of an empirical study which show that the cross-sectional properties of some ratios arr not temporally stable. Finally, suggestions are offered to improve modeling efforts.     

根植首都实体经济 给力城镇化建设——访北京农商银行行长王金山

北京农商银行拥有694家营业网点,全面覆盖16个区县所有乡镇。行长王金山是怎样在短时间内走遍所有网点,获得调研行长美名的?深谙银行经营的他对助推城镇化建设、严控风险又有哪些独特的见解?敬请关注《高端访谈》     

AN EXPLORATION INTO BANKRUPTCY DISCRIMINANT MODEL SENSITIVITY

Prediction has been a central theme in much of the accounting research and theory construction and verification over the past decade. Largely ignored in such studies has been consideration of the statistical properties of accounting measures, particularly as related to the effects of those properties on the signals from prediction models that use accounting measures as inputs. This study was designed to provide preliminary insight into the magnitude of the effects of this omission, and a bankruptcy prediction model was selected to facilitate the analysis. Results indicate that the linear discriminant model (as applied to prediction of failure) is sensitive to departures of inputdata distributions from multivariate normal.     

A RECONSIDERATION OF DISCRIMINATION IN MORTGAGE UNDERWRITING WITH DATA FROM A NATIONAL MORTGAGE BANK

This paper, analyzing over 12,000 conventional and FHA/VA loan applications to a national mortgage lender in the 1989–1990 period, argues that mortgage denials occur only in a minority of cases, where the borrower has not learned the lender's underwriting rules in advance. Widespread borrower foreknowledge of such rules is demonstrated by a discriminant finding that 9 of 10 borrowers correctly choose whether to apply under FHA vs. conventional programs, based on financial and equity characteristics. This contrasts with the far lower ability of econometric models to identify approval/denial outcomes. It is revealing that denials on the basis of credit problems, the only important information generally not available until post application, account for most racial/ethnic differences and borrower education affects the probability of approval of government insured loans more than loan to value. Contrary to common assumptions, race differences in FHA/VA lending a re at least as pronounced as in conventional lending; and outcomes for Asians, correctly measured, diverge as much from outcomes for whites, as do outcomes for Hispanics and African American.     

STOCK MARKET PERCEPTION OF INDUSTRIAL FIRM BANKRUPTCY

The objectives of this study are to determine (1) when the stock market first perceives the impending bankruptcy of a potentially bankrupt firm and (2) what firm-specific factors explain the interval between the perception time and the eventual date of bankruptcy (i.e., market lead time). A computational methodology based on the Hillmer-Yu technique is used to determine the month in which a structural change in the mean and variance of monthly stock return occurs for a potentially bankrupt firm. This parametric change month or the “market perception time” is computed for a sample of 47 industrial firms. The range of market lead times cautions against the common assumption of a uniform event period in event studies. The lead time interval (for both the mean and variance of monthly market return) of poteintially bankrupt firms is found to be positively related to the firm's earnings per share at the time of stock market perception of eventual bankruptcy. Neither the firm's asset size nor systematic risk appear to be significant indicators of lead time interval. Also, change in investment at market perception time is positively related to percentage change in the market lead times. This suggests that innovations in the investment variable are a source of new information to the security market in assesing the probability of future bankruptcy of a firm.     

稳健货币政策服务实体经济——访全国人大代表、中国人民银行行长助理郭庆平

“最后一年,要珍惜机会,做些事情。”此次两会上,全国人大代表、中国人民银行行长助理郭庆平真诚地向记者表达了内心的想法。郭庆平素来平易近人,语言简练精辟。自2008年12月任现职以来,历年两会他所关注的总是离不开金融宏观调控和货币政策,离不开实体经济发展特别是中小企业和保障性住房等薄弱环节问题。     

STOCK RETURNS AND CLASSIFICATION PATTERN OF FIRM-SPECIFIC FINANCIAL VARIABLES: EMPIRICAL EVIDENCE WITH FINNISH DATA

This paper incorporates the findings of empirical classification patterns of financial ratios to studies investigating the relation between stock returns and financial factors of a firm. The empirical results indicate that the relevant information of the investigated financial characteristics of a firm can be presented in one factor, with respect to which single financial ratios seem not to have incremental information content in the Finnish stock market. In crossindustry sample this factor is reported to be leverage. However, when studying purely industrial firms, the most important factor consists of ratios representing several a priori characteristics of a firm.     

PERSONAL BANKRUPTCY A RISK MANAGEMENT TECHNIQUE: POLICY IMPLICATIONS

Abstract: The purpose of this paper is to extend the risk management paradigm to include the decision by individuals to use the Federal Bankruptcy Act to manage personal financial risks. Broadening risk management to include personal bankruptcy is consistent with the view that risk management is no longer an interdisciplinary discipline that has a singular focus on managing corporate pure risks.     

THE RISK BEHAVIOR OF EQUITY OF FIRMS APPROACHING BANKRUPTCY

The risk behavior of financially distressed companies is studied using the shifting regimes regression model originally suggested by Brown, Durbin, and Evans. In addition, the presence of nonsynchronous trading is detected and the regression model is adjusted accordingly using Dimson's technique. The results reveal that the behavior of systematic risk as firms approach bankruptcy depends to some degree on appropriate identification of periods over which beta is constant and adjusting for nonsynchronous trading. The results also lend support to the importance of skewness and to some extent beta but not unsystematic risk in explaining the security returns of firms approaching bankruptcy. Finally, the behavior of equity risk is examined according to the outcome of the bankruptcy filing.