Micro and macro determinants of financial distress

Raymond McNamara, Keith Duncan, Simone Kelly

Research output: Chapter in Book/Report/Conference proceedingConference contributionResearchpeer-review

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Abstract

One criticism of failure prediction models is the bias resulting from pooling failure data over years when economic conditions might influence the failure of a firm. This research incorporates both macroeconomic variables and firm specific variables in explaining corporate failure. The results suggest that including economic variables improve the explanation of failure by ten percent. The economic variables included in the analysis were one-year lag in change in GDP, a two-year lag in interest rates, a one-year lag in the share price index, and a one-year lag in corporate profits. Economic variables were identified using a principal component analysis of key economic variables.
Original languageEnglish
Title of host publicationProceedings of the 15th International Business Research Conference
EditorsT. Hoque
Place of PublicationMelbourne
PublisherWorld Business Institute Australia
Pages1-25
Number of pages25
ISBN (Print)9780980827958
Publication statusPublished - 2011
EventInternational Business Research Conference - Mecure Hotel, Sydney, Australia
Duration: 21 Nov 201123 Nov 2011
Conference number: 15th
http://www.wbiconpro.com/sydneyconfpro2011.htm

Conference

ConferenceInternational Business Research Conference
CountryAustralia
CitySydney
Period21/11/1123/11/11
Internet address

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Economic variables
Lag
Financial distress
Prediction model
Macroeconomic variables
Share prices
Corporate failure
Interest rates
Price index
Pooling
Failure prediction
Economic conditions
Profit
Criticism
Principal component analysis

Cite this

McNamara, R., Duncan, K., & Kelly, S. (2011). Micro and macro determinants of financial distress. In T. Hoque (Ed.), Proceedings of the 15th International Business Research Conference (pp. 1-25). Melbourne: World Business Institute Australia.
McNamara, Raymond ; Duncan, Keith ; Kelly, Simone. / Micro and macro determinants of financial distress. Proceedings of the 15th International Business Research Conference. editor / T. Hoque. Melbourne : World Business Institute Australia, 2011. pp. 1-25
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McNamara, R, Duncan, K & Kelly, S 2011, Micro and macro determinants of financial distress. in T Hoque (ed.), Proceedings of the 15th International Business Research Conference. World Business Institute Australia, Melbourne, pp. 1-25, International Business Research Conference, Sydney, Australia, 21/11/11.

Micro and macro determinants of financial distress. / McNamara, Raymond; Duncan, Keith; Kelly, Simone.

Proceedings of the 15th International Business Research Conference. ed. / T. Hoque. Melbourne : World Business Institute Australia, 2011. p. 1-25.

Research output: Chapter in Book/Report/Conference proceedingConference contributionResearchpeer-review

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AB - One criticism of failure prediction models is the bias resulting from pooling failure data over years when economic conditions might influence the failure of a firm. This research incorporates both macroeconomic variables and firm specific variables in explaining corporate failure. The results suggest that including economic variables improve the explanation of failure by ten percent. The economic variables included in the analysis were one-year lag in change in GDP, a two-year lag in interest rates, a one-year lag in the share price index, and a one-year lag in corporate profits. Economic variables were identified using a principal component analysis of key economic variables.

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McNamara R, Duncan K, Kelly S. Micro and macro determinants of financial distress. In Hoque T, editor, Proceedings of the 15th International Business Research Conference. Melbourne: World Business Institute Australia. 2011. p. 1-25