This book explores methods and techniques to predict and eventually prevent financial distress in corporations. It analyzes the effects of the global financial crisis on Italian manufacturing companies and, more specifically, whether the crisis has increased the number of firms that are likely to fail. In the first chapter, the authors widely discuss the Corporate Financial Distress as well as the process and costs incurred. The second chapter is based on a review of the most used statistical models, splitting them into accounting-based and market-based models. The following chapter is dedicated to the methodology and the empirical analysis on Italian manufacturing companies from different industries. The last chapter presents practical evidence from Italian manufacturing companies during the recent financial crisis.
Matteo Pozzoli Ph.D., is Associate Professor of Business Administration at the Department of Law of Parthenope University in Naples(Italy). His research profile is focused upon corporate reporting, financial distress, and business valuation. He serves as a staff member of the CNDCEC, the Italian accountants' professional body. He is technical advisor at the Corporate Reporting Policy Group of the Accountancy Europe and member of the Small and Medium Practices Committee of the International Federation of Accountants. He participated as speaker in several international and national conferences.
Francesco Paolone holds a degree in Business Administration and Management at Bocconi University in Milan. He is currently a post-doc researcher of Business Administration at Department of Accounting, Management and Economics of Parthenope University in Naples. His research profiles are mainly focused on accounting and financial reporting, earnings management, bankruptcy prediction modelling, corporate governance and business models innovation. Among his experiences of studies abroad, there are several periods at Maastricht University in Netherlands, Georgetown University of Washington DC, Pompeu Fabra University in Barcelona, London School of Business and Finance in London and Aalborg University in Denmark. He is author of several scientific contributions in important international conferences, journals and books. He is also chartered accountant and auditor.
1. The genesis of Corporate Financial Distress (FD)
1.1. FD in the prior literature
1.2. The process of FD
1.3. Costs incurred in FD
2. Models of Corporate Financial Distress risk assessment
2.1. Models of Corporate Financial Distress risk assessment
2.2. Beaver's Univariate Analysis (1966)
2.3. Altman's multivariate analysis (1968)
2.4. The model of Ohlson (1980)
2.5. The model of Zmijewski (1984)
2.6. The Neural Networks of Etheridge and Sriram (1997)
2.7. Other models of Financial Distress
2.8. Accounting-based or market-based models?
3. Empirical analysis
3.1. Research design and Hypothesis
3.2. Sampling and data analysis on Italian manufacturing industries
3.3. Variable descriptions
3.4. Model setup: The Logit Regression
3.5. Empirical results
Conclusions and implications