An Investigation of Default Prediction Models in the Taiwan Banking Sector
The Empirical Economics Letters, 1-14, Vol. 12 (3), 303 – 310, 2012
14 Pages Posted: 6 Jan 2013 Last revised: 11 Aug 2016
Date Written: June 1, 2012
This study investigates the determinants of bank default probability and the predictive performance of the logit and the hazard models. Using accounting and market price information in the Taiwan bank sector for the period 1999 to 2010, the result shows both models provides adequate default predicative performances. Furthermore, it finds banks’ default probabilities are negatively and significantly related to distance to default and stock returns, but positively and significantly related to loan loss provision ratios.
Keywords: bank, distance-to-default, hazard model, logit model
JEL Classification: E50, G18, G20
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