Comparing market-based and accounting-based credit models: A survey of the theoretical literature
Document Type
Conference Proceeding
Publisher
Edith Cowan University
School
School of Business and Law
RAS ID
23291
Abstract
The paper examines two common types of corporate financial distress models, including (i) accounting-based models; and (ii) market-based models. While the accounting-based models use the analysis of financial statements to differentiate between distressed and non-distressed firms, market models utilise a combination of balance sheet items and volatility in market asset values of a firm to measure Distance to Default (DD). Findings from empirical studies using these models across countries and periods of time have provided mixed results. As such, the choice of an appropriate default models needs to factor in the unique circumstances of each credit portfolio.
Access Rights
free_to_read
Comments
Dinh, D., Powell, R., & Vo, D. (2016, December). Comparing market-based and accounting-based credit models: A survey of the theoretical literature. In ECU Business Doctoral and Emerging Scholars Colloquium 2016 (pp. 68 - 76). Available here