Do pledge ratio by board members and foreign investment ratio enhance the financial distress prediction model
Date Issued
2004
Date
2004
Author(s)
Liu, Shien-Hui Alice
DOI
en-US
Abstract
The purpose and objective of this study is to examine given financial variables, whether pledge ratio by board members and foreign investment ratio have incremental explanatory power in predicting financial distress. Specifically, I integrate accounting and two capital market variables, pledge ratio by board members and foreign investment ratio, to build up multiple regression models and binary logistic regression model (Logit) for the prediction of financially distress firms. Debt ratio and fixed ratio are found to be the most explanatory financial variables across years and models. Pledge ratio by board members and foreign investment ratio are found to have positive contribution to the probability of financial distress; and unexpectedly foreign investment ratio seems to have more explanatory power than pledge ratio. In Logit model, I find that both Pledge ratio by board members and foreign investment ratio have increased the hit rate or classification accuracy and lowered both Type I and Type II errors substantially. For the purposes of obtaining more realist and practical prediction, I develop an out-sample predication. Out-sample predication appears to have high classification accuracy rate.
Subjects
財務危機預測模型
董監事持股質押比率
外資投資比重
foreign investment ratio
financial distress prediction model
pledge ratio by board members
Type
thesis