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Does default point vary with firm size?

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  • Yaojie Zhang
  • Benshan Shi

Abstract

This article aims to improve the predictive ability of KMV model by distinguishing firm size. The evidence suggests that default point would vary with firm size. Using the method of particle swarm optimization, we obtain the optimal default point separately for large firms and small firms. Several statistical tests such as the model confidence set methodology show that our relatively tractable model is more likely to have the strongest predictive ability.

Suggested Citation

  • Yaojie Zhang & Benshan Shi, 2018. "Does default point vary with firm size?," Applied Economics Letters, Taylor & Francis Journals, vol. 25(15), pages 1078-1082, September.
    • Handle: RePEc:taf:apeclt:v:25:y:2018:i:15:p:1078-1082
    DOI: 10.1080/13504851.2017.1397843
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    Cited by:

    1. Wen Su, 2021. "Default Distances Based on the CEV-KMV Model," Papers 2107.10226, arXiv.org, revised May 2022.

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