Quotation Vana, Laura, Hofmarcher, Paul, Grün, Bettina, Hornik, Kurt. 2018. Identifying key factors in accounting-based models of credit risk based on a predictive model averaging approach. Advances in Quantitative Analysis of Finance and Accounting. 16 117-146.


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Abstract

Accounting-based models in credit risk have been shown to perform well in predicting a firm's ability to meet its financial obligations, even if they include only a limited number of financial ratios measuring different aspects of the firm's financial health. However, there is little agreement on a specific set of ratios to be incorporated in these models in the existing literature. This study provides guidance on the set of accounting ratios to include in such models based on empirical results obtained for rating implied 1-year probabilities of default for a data set of large U.S. corporations. The analysis performed consists of a predictive Bayesian model averaging approach where the models included are restricted in the number of accounting ratios from different categories. The identified model is shown to provide similar predictive performance as more complex models, while retaining interpretability and simplicity.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Journal article
Journal Advances in Quantitative Analysis of Finance and Accounting
Language English
Title Identifying key factors in accounting-based models of credit risk based on a predictive model averaging approach
Volume 16
Year 2018
Page from 117
Page to 146
Reviewed? Y
DOI http://dx.doi.org/10.6293/AQAFA.201812_16.0004
Open Access N

Associations

People
Vana, Laura (Details)
Hofmarcher, Paul (Details)
Grün, Bettina (Details)
Hornik, Kurt (Details)
Organization
Institute for Statistics and Mathematics IN (Details)
Research Institute for Computational Methods FI (Details)
Research areas (ÖSTAT Classification 'Statistik Austria')
1104 Applied mathematics (Details)
1105 Computer software (Details)
1121 Operations research (Details)
1162 Statistics (Details)
1165 Stochastics (Details)
5361 Financial management (Details)
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