Proceedings of the 7th International Conference on Economic Management and Green Development
Series Vol. 38
, 10 November 2023
Access | Article
Analyzing the Models of Financial Distress in Credit Risk
* Author to whom correspondence should be addressed.
Advances in Economics, Management and Political Sciences, Vol. 38,
Published 10 November 2023. © 2023 The Author(s). Published by EWA
This article is an open access article distributed under the terms and
of the Creative Commons
Attribution (CC BY) license
, which permits
unrestricted use, distribution, and reproduction in any medium, provided the
original work is properly cited.
Citation Qinkai Xu, Xi ai Zhang. Analyzing the Models of Financial Distress in Credit Risk. AEMPS (2023) Vol. 38: 1-5. DOI: 10.54254/2754-1169/38/20231875.
This paper presents a study comparing the effectiveness of accounting-based and market-based models predicting financial distress. We examine various periods, including events from the 1970s to the 1990s, the impact of COVID-19, and the effect of APRA. Our findings demonstrate that an accounting-based distress model performs similarly to the market-based model of defaults. Furthermore, when we combine both sources of information, the resulting model outperforms either individual model. These results suggest that accounting and market-based information are mutually reinforcing when assessing distress levels in pricing.
accounting-based models, market-based models, credit risk, forecasting bankruptcy
1. DEMIRBAS OZBEKLER, MERVE (2023) Essays on Credit Risk, Information Environment and Uncertainty. Doctoral thesis, University of Essex.
2. Kim, Young-Ah and Moffatt, Peter G and Peters, Simon (2022) Generalized additive modeling of the credit risk of Korean personal bank loans. Journal of Credit Risk, 18 (3). pp. 77-103. DOI https://doi.org/10.21314/jcr.2022.004
3. Liñares-Zegarra, José and Wilson, John OS (2014) Credit card interest rates and risk: new evidence from US survey data. The European Journal of Finance, 20 (10). pp. 892-914. DOI https://doi.org/10.1080/1351847x.2013.839461
4. He, K. (2012). Expected Default Measures in the KMV model and the Market-based model.
5. Wang, Y., Lin, L., Kuo, H. C., & Piesse, J. (2010). Detecting corporate failure. Handbook of quantitative finance and risk management, 1593-1606.
6. Hudson, C., Kurian, S., & Lewis, M. (2023). Non-bank Lending in Australia and the Implications for Financial Stability. 1. 1 Renters, Rent Inflation and Renter Stress 2. Fixed-rate Housing Loans: Monetary Policy Transmission and Financial 10 Stability Risks 3. 19 A New Measure of Average Household Size 4. 27 Non-bank Lending in Australia and the Implications for Financial Stability, 27.
7. Casu, Barbara and Clare, Andrew and Sarkisyan, Anna and Thomas, Stephen (2011) Does securitization reduce credit risk-taking? Empirical evidence from US bank holding companies. The European Journal of Finance, 17 (9-10). pp. 769-788. DOI https://doi.org/10.1080/1351847x.2010.538526
The datasets used and/or analyzed during the current study will be available
from the authors upon reasonable request.
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0
Authors who publish this series agree to the following terms:
1. Authors retain copyright and grant the series right of first publication
with the work simultaneously licensed under a Creative Commons Attribution
License that allows others to share the work with an acknowledgment of the
work's authorship and initial publication in this series.
2. Authors are able to enter into separate, additional contractual
for the non-exclusive distribution of the series's published version of the
(e.g., post it to an institutional repository or publish it in a book), with
acknowledgment of its initial publication in this series.
3. Authors are permitted and encouraged to post their work online (e.g., in
institutional repositories or on their website) prior to and during the
process, as it can lead to productive exchanges, as well as earlier and
citation of published work (See Open Access Instruction).
- Volume Title
- Proceedings of the 7th International Conference on Economic Management and Green Development
- ISBN (Print)
- ISBN (Online)
- Published Date
- 10 November 2023
- Advances in Economics, Management and Political Sciences
- ISSN (Print)
- ISSN (Online)
- © 2023 The Author(s)
- Open Access
- This article is an open access article distributed under the terms and
conditions of the Creative Commons Attribution (CC BY) license, which
permits unrestricted use, distribution, and reproduction in any medium,
provided the original work is properly cited