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Using accounting‐based and loan‐related information to estimate the cure probability of a defaulted company
Author(s) -
Lohmann Christian,
Ohliger Thorsten
Publication year - 2021
Publication title -
european financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.311
H-Index - 64
eISSN - 1468-036X
pISSN - 1354-7798
DOI - 10.1111/eufm.12279
Subject(s) - default , loan , actuarial science , accounting , probability of default , business , econometrics , economics , credit risk , finance
The cure of a defaulted company has important implications for the estimation of the loss given default. In this study, we estimate the probability of a defaulted company being cured using data on a large international sample of defaulted companies. More specifically, we examine whether historic accounting information on a defaulted company and loan‐related information are associated with that company's probability of being cured. The main finding of our analysis is that both accounting‐based and loan‐related independent variables increase the validity of cure prediction models.