In this paper, we examine how county unemployment rates affect consumers’ delinquency and bankruptcy behavior by focusing on the credit card market. In particular, after controlling for credit supply and shocks like divorce and health coverage we investigate whether consumer propensity for delinquency and bankruptcy changes with respect to the macroeconomic fluctuations across counties. Our res...

Financial insolvency is a rare occurrence in American state and local governments. However, when it does happen, as in the case of Detroit’s historical bankruptcy filing in 2013, the consequences for vital city services, public employees, and taxpayers can be devastating. This essay reviews existing and emerging research on the causes of government fiscal crises, paying particular attention to ...

Business failures can cause financial damages to investors, creditors, or even society. For this reason bankruptcy prediction is one of the most challenging tasks in the field of financial decisionmaking. Business failure prediction has been an active research area since the 60s. The work of Beaver (1966) who performed univariate analysis of financial ratios and the work of Altman (1968) who em...

We predict the onset of personal bankruptcy using least squares regression. Although well publicized, only 2,244 bankruptcies occur in our data set of 2.9 million months of credit-card activity. We use stepwise selection to find predictors of these from a mix of payment history, debt load, demographics, and their interactions. This combination of rare responses and over 67,000 possible predicto...

Recent theoretical literature has debated the desirability of permitting debtors to contract with lenders over control rights in bankruptcy. Proponents point to the monitoring benefits brought from concentrating control rights in the hands of a single lender. Detractors point to the costs imposed on other creditors by a senior claimant’s inadequate incentives to maximise net recoveries. The UK ...

We model the spillovers from a distressed firm’s debt restructuring to its competitors and related firms. We demonstrate that there are two channels for these spillovers: a direct channel that transmits the effect of bankruptcy on the firm’s competitiveness, and an indirect channel that transmits information about the firm. When the indirect channel is dominant, a firm’s bankruptcy pushes up it...

Ability to predict corporate bankruptcy as one of the areas of risk management has various social and individual aspects. Timely warning of bankruptcy risk makes managers and investors able to do preventative measures. These measures consist of changing operational policy, financial restructuring and even optional treatment which by reducing potential losses, improve social and individual resou...

Nowadays, Romania has a functional market economy. Retrospective financial analysis is used to increase the profitability and value of an economic entity searching for sources of capital and an efficient allocation. This analysis requires certain financial methods and techniques to assess firm’s financial performance at a given moment. Economic theory has always been interested in developing me...

In this paper models of default prediction conditional on financial statements of Austrian firms are presented. Apart from giving a discussion on the suggested 65 variables the issue of potential problems in developing rating models is raised and possible solutions are reviewed. A unique data set on credit risk analysis for the Austrian market is constructed and used to derive rating models for...

We investigate the inventory stocking and capital structure decisions of a firm in the presence of an asset-based credit limit and costly bankruptcy. The key aspect of the paper is that we model the simultaneous decisions of an equity investor, the manager of the firm, and a bank. The investor decides how much to invest in the equity of the firm. The firm, a newsvendor, takes the investor’s dec...