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MARKET ANTICIPATION OF CORPORATE FAILURE IN THE UK
Author(s) -
Hennawy R.H.A.,
Morris R.C.
Publication year - 1983
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/j.1468-5957.1983.tb00437.x
Subject(s) - bankruptcy , solvency , anticipation (artificial intelligence) , position (finance) , identification (biology) , economics , going concern , financial economics , actuarial science , business , accounting , finance , market liquidity , audit , botany , artificial intelligence , computer science , auditor's report , biology
In practice it seems that the identification of impending failure is a much more gradual process than appears to be implied by discriminant and similar models. This paper, after examining the methodological problems associated with such research and reviewing previous work in this area, reports the behaviour of share price relatives of 20 British companies which failed between 1960 and 1971. It appears that on average analysts began to perceive a fum's financial difficulties some five years prior to bankruptcy, which would seem to support the view that the market refers to a broad data set in assessing a company's solvency position.