Bankruptcy Prediction with a Doubly Stochastic Poisson Forward Intensity Model and Low-Quality Data

Risks

Radosław Rejman¹  Tomasz Berent¹ 

[1] Capital Markets Department, Warsaw School of Economics, 02-554 Warszawa, Poland;

关键词: default;    bankruptcy risk;    Poisson process;    doubly stochastic assumption;    ROC curve;    accuracy ratio;   

DOI  :  10.3390/risks9120217

来源: DOAJ

【 摘 要 】

With the record high leverage across all segments of the (global) economy, default prediction has never been more important. The excess cash illusion created in the context of COVID-19 may disappear just as quickly as the pandemic entered our world in 2020. In this paper, instead of using any scoring device to discriminate between healthy companies and potential defaulters, we model default probability using a doubly stochastic Poisson process. Our paper is unique in that it uses a large dataset of non-public companies with low-quality reporting standards and very patchy data. We believe this is the first attempt to apply the Duffie–Duan formulation to emerging markets at such a scale. Our results are comparable, if not more robust, than those obtained for public companies in developed countries. The out-of-sample accuracy ratios range from 85% to 76%, one and three years prior to default, respectively. What we lose in (data) quality, we regain in (data) quantity; the power of our tests benefits from the size of the sample: 15,122 non-financial companies from 2007 to 2017, unique in this research area. Our results are also robust to model specification (with different macro and company-specific covariates used) and statistically significant at the 1% level.

【 授权许可】

Unknown