Have Financial Statements Become Less Informative? Evidence from the Ability of Financial Ratios to Predict Bankruptcy

By W. H. Beaver, Maureen F. McNichols, Jung-Wu Rhie. 2005

541 citations recorded by the source corpus.

View Paper: https://www.semanticscholar.org/paper/e1d505549edf3f88b8d1a8168c655de936abd244

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Accounting

In Finance

Citations in the corpus

In Search of Distress Risk (2008, background): “Other recent papers using the hazard approach include Chava and Jarrow (2004), who work with monthly data and explore industry effects, and Beaver, McNichols, and Rhie (2005), who explore the stability of the coefficients over time.”
Understanding Earnings Quality: A Review of the Proxies, Their Determinants and Their Consequences (2010, unknown): “…al. (1997), Francis and Schipper (1999), Brown et al. (1999), Francis et al. (2002b), Landsman and Maydew (2002), Core et al. (2003), Ryan and Zarowin (2003), Dontoh et al. (2004), Beaver et al. (2005), Kim and Kross (2005), Collins et al. (2007), Jorion et al. (2007), and Dichev and Tang (2008).”
The age-effect of financial indicators as buffers against the liability of newness ☆ (2010, background): “This is consistent with prior bankruptcy prediction studies using similar data (Beaver et al., 2005; Chava and Jarrow, 2004; Shumway, 2001) as well as liabilities of newness studies using annual data (Palmer et al.”
Bankruptcy prediction: the case of Japanese listed companies (2009, background): “data in the 1980s, Begley et al. (1996) find that the re-estimated coefficients of these two models change substantially from the original ones.”
Remaining Financially Healthy and Competitive: The Role of Financial Predictors (2020, background): “Beaver et al. (2005) and Beaver et al. (2012) explore the effect of differences in financial reporting and focus on attributes of the predictive ability of financial ratios of bankruptcy.”
Financial Statement Comparability and Expected Crash Risk (2016, unknown): “Firm size (FIRM_SIZE) is controlled as it has been found to affect a firm's stock price volatility (Pástor and Veronesi, 2003), credit risk (Beaver et al., 2005), and crash risk (Chen et al., 2001; Hutton et al., 2009).”
Variable selection and corporate bankruptcy forecasts (2015, result): “By contrast, accounting researchers, e.g., Beaver et al. (2005), have reiterated the relevance of accounting-based variables by showing that their predictive power is strikingly consistent across time.”
Who Uses Financial Reports and for What Purpose? Evidence from Capital Providers (2014, unknown): “Beaver et al. (2005, 2010) summarize this literature and show that the three key ratios are: (1) ROA (profitability of assets); (2) EBITDA to total liabilities (ability of cash flow to service the payments); and (3) total liabilities to total assets (a measure of assets available to repay debt).”
Multi-Period Corporate Default Prediction With Stochastic Covariates (2007, unknown): “It is well understood, however, that the current rating of a firm does not incorporate much of the influence of the business cycle on default rates (Nickell, Perraudin and Varotto, 2000; Kavvathas, 2001; Wilson 1997a, b), nor the important effect of prior ratings history (Behar and Nagpal, 2001; Lan”
Corporate Bond Default Risk: A 150-Year Perspective (2011, unknown): “Accounting-based examples include Beaver (1966), Altman (1968), Ohlson (1980), Beaver, McNichols, and Rhie (2005), and others that focus on earnings and accounting ratios (which reflect the sales, expenses, growth, liquidity, etc. of the firm, which in turn derive from the economic and business…”
Do differences in financial reporting attributes impair the predictive ability of financial ratios for bankruptcy? (2012, unknown): “Five hundred and four of these matched firms were also included in the Beaver, McNichols, and Rhie (2005) sample (cf. their Table 1), while 1,276 firms were not.”
Multiperiod Corporate Default Prediction - A Forward Intensity Approach (2012, unknown): “For convenience, we let fit( ) = exp ( 0( ) + 1( )xit,1 + 2( )xit,2 + ⋅ ⋅ ⋅ k( )xit,k) (5) git( ) = fit( ) + exp ( 0( ) + 1( )xit,1 + 2( )xit,2 + ⋅ ⋅ ⋅ k( )xit,k) (6) Note that fit( ) and git( ) do not need to share the same set of state variables.”
Patents and the Survival of Internet-related IPOs (2007, unknown): “Applying this type of model to bankruptcy data, Chava & Jarrow (2004) find that accounting variables add little predictive power when market based measures are already included in the model while Beaver et al. (2005) identify additional explanatory power of information based on financial reporting.”