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Investigating the solvency of brazilian credit unions using a proportional hazard model
Author(s) -
Braga Marcelo J.,
Fully Bressan Valéria G.,
Colosimo Enrico A.,
Bressan Aureliano A.
Publication year - 2006
Publication title -
annals of public and cooperative economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.526
H-Index - 37
eISSN - 1467-8292
pISSN - 1370-4788
DOI - 10.1111/j.1370-4788.2006.00298.x
Subject(s) - solvency , insolvency , loan , credit risk , market liquidity , business , actuarial science , equity (law) , economics , financial system , finance , political science , law
** :Due to high interest rates and bank spreads, the number of credit unions in Brazil has increased over recent years. As financial institutions, these cooperatives need tools to signal impending financial problems. This paper focuses on one tool that can be used to evaluate credit union solvency: the Cox Proportional Hazards Model. A sample of 80 credit unions from the Brazilian state of Minas Gerais was selected to supply data. The analysis period is between December 2001 and June 2003. The results indicate that the relevant indicators for insolvency prediction are, in descending order of predictive ability, General Liquidity, Salary and Benefit Expenses, and the Loan/Equity Ratio. In general, results produced using the delineated theoretical model were in consonance with international literature .