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JOURNAL OF ACCOUNTING AND FINANCE
The Role of Recession Forecasts and F-score in Predicting Credit Risks
Author(s): Kevin Chi-Keung Li, Eric Chi-Yung Ng, Bob Wai-Ho Leung
Citation: Kevin Chi-Keung Li, Eric Chi-Yung Ng, Bob Wai-Ho Leung, (2020) "The Role of Recession Forecasts and F-score in Predicting Credit Risks," Journal of Accounting and Finance, Vol. 20, ss. 6, pp. 49-61
Article Type: Research paper
Publisher: North American Business Press
Abstract:
An accurate forecast for corporate default risk is crucial for financial institutions to effectively quantify potential expected and unexpected borrower losses. This paper develops a logistic regression model to simultaneously examine the roles of firm-specific fundamentals and economic outlook in predicting corporate default risk. The model is estimated using U.S. listed non-financial firms over the 1997⎼2009 period. The empirical findings suggest that economic outlook captured by recession probability forecast, firm-specific fundamental factors measured by the Z-score and F-score, and the interaction between economic outlook and firm-specific fundamental factors play statistically significant roles in predicting bankruptcy risk. The model exhibits relatively high levels of goodness-of-fit and classification ability, and low levels of forecast error.
