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Testing Corporate Model Prediction Accuracy

Author

Listed:
  • Murray Nash

    (New Zealand Treasury.)

  • Michael Anstis

    (Department of Economics, University of Auckland.)

  • Michael Bradbury

    (Department of Economics, University of Auckland.)

Abstract

This paper investigates the predictive accuracies of corporate failure models. We find, through the elimination of biases found in these models, that the success rates for the placing of corporations into their correct categories are overstated. The paper confirms the view that the use of predictive corporate distress models should not be the sole criterion for making a lending decision.

Suggested Citation

  • Murray Nash & Michael Anstis & Michael Bradbury, 1989. "Testing Corporate Model Prediction Accuracy," Australian Journal of Management, Australian School of Business, vol. 14(2), pages 211-221, December.
    • Handle: RePEc:sae:ausman:v:14:y:1989:i:2:p:211-221
    DOI: 10.1177/031289628901400205
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    References listed on IDEAS

    as
    1. Deakin, Eb, 1972. "Discriminant Analysis Of Predictors Of Business Failure," Journal of Accounting Research, Wiley Blackwell, vol. 10(1), pages 167-179.
    2. Edmister, Robert O., 1972. "An Empirical Test of Financial Ratio Analysis for Small Business Failure Prediction," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 7(2), pages 1477-1493, March.
    3. Edward I. Altman, 1968. "The Prediction Of Corporate Bankruptcy: A Discriminant Analysis," Journal of Finance, American Finance Association, vol. 23(1), pages 193-194, March.
    4. Marais, Ml & Patell, Jm & Wolfson, Ma, 1984. "The Experimental-Design Of Classification Models - An Application Of Recursive Partitioning And Bootstrapping To Commercial Bank Loan Classifications," Journal of Accounting Research, Wiley Blackwell, vol. 22, pages 87-114.
    5. Blum, M, 1974. "Failing Company Discriminant-Analysis," Journal of Accounting Research, Wiley Blackwell, vol. 12(1), pages 1-25.
    6. Edward I. Altman, 1968. "Financial Ratios, Discriminant Analysis And The Prediction Of Corporate Bankruptcy," Journal of Finance, American Finance Association, vol. 23(4), pages 589-609, September.
    7. Ohlson, Ja, 1980. "Financial Ratios And The Probabilistic Prediction Of Bankruptcy," Journal of Accounting Research, Wiley Blackwell, vol. 18(1), pages 109-131.
    8. Hamer, Michelle M., 1983. "Failure prediction: Sensitivity of classification accuracy to alternative statistical methods and variable sets," Journal of Accounting and Public Policy, Elsevier, vol. 2(4), pages 289-307.
    Full references (including those not matched with items on IDEAS)

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