Wolter, Marcus and Roesch, Daniel (2014) Cure events in default prediction. EUROPEAN JOURNAL OF OPERATIONAL RESEARCH, 238 (3). pp. 846-857. ISSN 0377-2217, 1872-6860
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This paper evaluates the resurrection event regarding defaulted firms and incorporates observable cure events in the default prediction of SME. Due to the additional cure-related observable data, a completely new information set is applied to predict individual default and cure events. This is a new approach in credit risk that, to our knowledge, has not been followed yet. Different firm-specific and macroeconomic default and cure-event-influencing risk drivers are identified. The significant variables allow a firm-specific default risk evaluation combined with an individual risk reducing cure probability. The identification and incorporation of cure-relevant factors in the default risk framework enable lenders to support the complete resurrection of a firm in the case of its default and hence reduce the default risk itself. The estimations are developed with a database that contains 5930 mostly small and medium-sized German firms and a total of more than 23000 financial statements over a time horizon from January 2002 to December 2007. Due to the significant influence on the default risk probability as well as the bank's possible profit prospects concerning a cured firm, it seems essential for risk management to incorporate the additional cure information into credit risk evaluation. (C) 2014 Elsevier B.V. All rights reserved.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | CREDIT RISK; FINANCIAL RATIOS; SAMPLE SELECTION; TERM STRUCTURE; MIXTURE MODEL; SURVIVAL-DATA; BANKRUPTCY; RECOVERY; SPREADS; FAILURE; Finance; Risk analysis; Risk management |
| Subjects: | 600 Technology > 650 Management & auxiliary services |
| Divisions: | Business, Economics and Information Systems > Institut für Betriebswirtschaftslehre > Lehrstuhl für Statistik und Risikomanagement (Prof. Dr. Rösch) |
| Depositing User: | Dr. Gernot Deinzer |
| Date Deposited: | 08 Aug 2019 12:11 |
| Last Modified: | 08 Aug 2019 12:11 |
| URI: | https://pred.uni-regensburg.de/id/eprint/9327 |
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