This paper examines the performance of the Morningstar Solvency Score, Morningstar's new accounting-ratio based metric for predicting bankruptcy, in comparison to the Altman Z-Score and Distance to Default models. Specifically we tested the following: 1. The ordinal ability of each model to distinguish companies most likely to file for bankruptcy from those least likely to file for bankruptcy a...

This Article explores the relationship between consumer credit markets and bankruptcy policy. In general, I argue that the causative relationships running between borrowing and bankruptcy compel a new strategy for policing the conduct of lenders and borrowers in modern consumer credit markets. The strategy must be sensitive to the role of the credit card in lending markets and must recognize th...

This paper examines North American pulp and paper company bankruptcies that occurred between 1990 and 2009. We demonstrate that shareholders suffer substantial losses (37%) during the month a bankruptcy occurs. Encouragingly, we show that financial ratios are useful in predicting firm failure and that failed firms are less profitable, more liquidity constrained and higher in debt leverage. Usin...

Article history: Received 13 August 2010 Received in revised form 12 July 2012 Accepted 17 July 2012 Available online 23 July 2012 We use data from the US airline industry to investigate whether firms that are under bankruptcy protection, as well as these firm's product market rivals, change the quality of the products they offer. We measure the quality of the services offered by a carrier usin...

A personal bankruptcy prediction system running on credit card data is proposed. Personal bankruptcy, which usually results in significant losses to creditors, is a rapidly increasing yet little understood phenomenon. The most commonly used methods in personal bankruptcy prediction are credit scoring models. Some data mining models have also been investigated in this domain. Neither the scoring...

Bankruptcy prediction is of great importance in financial statement analysis to minimize the risk of decision strategies. It attempts to separate distress companies from healthy ones according to some financial indicators. Since the real data usually contains irrelevant, redundant and correlated variables, it is necessary to reduce the dimensionality before performing the prediction. In this pa...

Solvency games, introduced by Berger et al., provide an abstract framework for modelling decisions of a risk-averse investor, whose goal is to avoid ever going broke. We study a new variant of this model, where, in addition to stochastic environment and fixed increments and decrements to the investor’s wealth, we introduce interest, which is earned or paid on the current level of savings or deb...

We analyze the interaction of firm product quality and pricing decisions with financial distress and bankruptcy in the airline industry. We consider an airline’s choices of quality and price as dynamic decisions that trade off current cash flows for future revenue. We examine how airline mishandled baggage, on-time performance and pricing are related to financial distress and bankruptcy, contro...

Using quarterly data on personal consumer bankruptcy for 1989:Q4 through 1998:Q1, this study examines the impact that the introduction of casino gambling has on per capita personal bankruptcy filings. Eight jurisdictions that have recently adopted gambling are compared with a set of matching control jurisdictions, communities without casinos that are economically and demographically similar to ...

By compiling a novel dataset from bankruptcy court dockets recorded in Delaware between 2001 and 2002, we build and estimate a structural model of Chapter 13 bankruptcy. This allows us to quantify how key debtor characteristics, including whether they are experiencing bankruptcy for the …rst time, their past due secured debt at the time of …ling, and income in excess of that required for basic ...