nach oben

Erschienen in:

2023 | OriginalPaper | Buchkapitel

Bankruptcy Probability and Firm Life Expectancy

verfasst von : Zhiqiang Zhang

Erschienen in: Fundamental Problems and Solutions in Finance

Verlag: Springer Nature Singapore

Einloggen

Aktivieren Sie unsere intelligente Suche, um passende Fachinhalte oder Patente zu finden.

search-config

KI-gestützte Suche

Aus

Abstract

This chapter explores two problems: bankruptcy probability and company life expectancy. Bankruptcy probability and bankruptcy cost are the major bankruptcy risk measurement and major concern of the relevant parties of a company. However, neither bankruptcy probability nor bankruptcy cost can be calculated in mainstream finance. This chapter solves this quantitative problem based on the bankruptcy cost model derived in Chapter “Debt/Loan Risk, Bankruptcy Cost and Debt/Loan Pricing”. In addition, the bankruptcy probability and cost can be calculated for potential current bankruptcy and overall bankruptcy respectively. Such new bankruptcy risk analyses are illustrated based on the case of the three home appliances giants in China. Further, the findings in the bankruptcy risks setup the theoretical foundation for us to further predict the company life expectancy. We then explore the estimation of company life expectancy. Based on the queueing theory, the estimation of company life expectancy depends on the long run applicable annual bankruptcy probability. Further discussion reveals the logic from cumulative bankruptcy probability to annual bankruptcy probability and further to the long run applicable annual bankruptcy probability. Hence the problem of company life expectancy estimation is ideally solved.

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

über 102.000 Bücher
über 537 Zeitschriften

aus folgenden Fachgebieten:

Automobil + Motoren
Bauwesen + Immobilien
Business IT + Informatik
Elektrotechnik + Elektronik
Energie + Nachhaltigkeit
Finance + Banking
Management + Führung
Marketing + Vertrieb
Maschinenbau + Werkstoffe
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

über 67.000 Bücher
über 340 Zeitschriften

aus folgenden Fachgebieten:

Bauwesen + Immobilien
Business IT + Informatik
Finance + Banking
Management + Führung
Marketing + Vertrieb
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Vorheriges Kapitel Some Extensive Discussions of ZZ Leverage Model

Nächstes Kapitel Further Discussion: A Novel—The Falling Apples

The total asset can provide additional guarantee for the repayment of the current debt. This implies some of the repayment pressure or risk is partaken by the total asset, or the current asset is relative less risky than the total asset. But the specific measurement of the division of the risk is a little complicated. We just deal it simply by cutting the volatility of the total asset by 50% as the volatility of the current asset.

One of the possible situations is: the growth rate is 8%, required payback period is 10 years, and the expected return on equity is 12%, then, based on Eq. (29) in Chapter “Stock and Equity Valuation: Where Discounting Does Not Work”, ZZ P/B = [(1 + g)ⁿ − 1](1 + g)r_e/g = 2.03.

For healthy companies like those three companies, this is a reasonable assumption.

Round up rather than round off.

Zhang Z. Volatility and company life expectancy—research based on ZZ bankruptcy cost model. Res Financ Issues. 2018:91–9.

Zhang Z. Modeling corporate bankruptcy risk and its application. Mon J Finance Account. 2021;11:1–6.

Altman EI, Haldeman R, Narayanan P. Zeta analysis: a new model to identify bankruptcy risk of corporations. J Bank Finance. 1977;1(1): 29–53.

Beaver WH. Financial ratios as predictors of failure. J Account Res. 1966;4:71–111. CrossRef

Beaver WH. Alternative accounting measures as predictors of failure. Account Rev. 1968;43:113–22.

Altman EI. Financial ratios, discriminant analysis and the prediction of corporate bankruptcy. J Finance. 1968;189–209.

Agarwal V, Taffler RJ. Twenty-five years of the Taffler z-score model: does it really have predictive ability? Account Bus Res. 2007;37:285–300.CrossRef

Ashraf S, Félix EGS, Serrasqueiro Z. Do traditional financial distress prediction models predict the early warning signs of financial distress? J Risk Financ Manage. 2019;12:55–66.

Koh HC, Tan SS. A neural network approach to the prediction of going concern status. Account Bus Res. 1999;29:211–16.

10.

Sigrist F, Hirnschall C. Grabit: gradient tree-boosted Tobit models for default prediction. J Bank Finance. 2019;102:177–92.CrossRef

11.

Hull JC. Risk management and financial institutions. 3rd ed. Wiley; 2012. p. 249.

Titel: Bankruptcy Probability and Firm Life Expectancy
verfasst von: Zhiqiang Zhang
Verlag: Springer Nature Singapore
Buch: Fundamental Problems and Solutions in Finance
Print ISBN: 978-981-19-8268-2

Electronic ISBN: 978-981-19-8269-9

Copyright-Jahr: 2023
DOI: https://doi.org/10.1007/978-981-19-8269-9_12