With One Shot, Which Bullet Would You Use? Market versus Accounting Data in Bankruptcy Prediction Part I (The Univariate Case)

The International Journal of Finance, 26(2), 2014

45 Pages Posted: 3 Apr 2016

See all articles by Giovanni Fernandez

Giovanni Fernandez

Stetson University

Arun J. Prakash

Florida International University (FIU) - Department of Finance; Florida International University

Suchi Mishra

Florida International University (FIU) - Department of Finance

Date Written: June 1, 2012

Abstract

In this paper, we investigate the univariate behavior of variables prior to bankruptcy. In contrast with the previous literature, we study not only the behavior of accounting ratios, but also that of market and microstructure variables. The most important finding is that market and microstructure variables are best at correctly classifying bankrupt firms. The best predictors are price, standard deviation, and bid-ask spread. Accounting ratios still play an important role; ratios that include net income, current liabilities, and working capital perform much better in tests to distinguish between bankrupt and nonbankrupt firms than do other ratios.

Suggested Citation

Fernandez, Giovanni and Prakash, Arun Jai and Mishra, Suchismita, With One Shot, Which Bullet Would You Use? Market versus Accounting Data in Bankruptcy Prediction Part I (The Univariate Case) (June 1, 2012). The International Journal of Finance, 26(2), 2014. Available at SSRN: https://ssrn.com/abstract=2757789

Giovanni Fernandez (Contact Author)

Stetson University ( email )

Gulfport, FL 33707
United States

Arun Jai Prakash

Florida International University (FIU) - Department of Finance ( email )

University Park
11200 SW 8th Street
Miami, FL 33199
United States

Florida International University ( email )

Miami, FL 33199
United States

Suchismita Mishra

Florida International University (FIU) - Department of Finance ( email )

University Park
11200 SW 8th Street
Miami, FL 33199
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
36
Abstract Views
258
PlumX Metrics