This study develops a flow-based corporate credit model that is able to generate concurrently and endogenously a firm's multi-period probabilities of liquidity crunch and expected liquidity shortfalls. Based upon a state-dependent internal liquidity model, it incorporates both systematic and...

We empirically examine the agency and information asymmetry issues in structural credit models using commercial bank data from 2001 to 2005. We find five independent information asymmetry and agency issue related factors that can explain absolute differences in the default probabilities...

We empirically examine the agency issues in structural credit models using bank data from 2001 to 2005. We find five independent agency related factors explaining the estimating errors of various structural models from 27% to 70%. They include factors of profit efficiency, cost efficiency,...

Of all the structural form credit models, this is one of the first studies to suggest using a firm's future cash flows to estimate its asset value distribution, rather than employing a firm's equity market value. We employ a state-dependent free cash flow process to generate a firm's...

This study examines the effects of information uncertainty and information asymmetry on corporate bond yield spreads using American bond data from year 2001 to 2006. Empirical results show that corporate bond investors charge a significant risk premium on both information uncertainty and...

This study examines the effects of inside debts on a firm's target leverage and explains the low-leverage puzzle (e.g. Graham, 2000) by the over estimation of the target leverage due to neglecting the effects of inside debts. We find that a firm's inside debt affects not only the target...

In recent decades, literatures on credit risk measurement evolved dramatically. According to modeling techniques, they can be roughly grouped into two major categories, quot;accounting-based modelsquot; and quot;market-based modelsquot;. However, among the above models, few of them develop...

This study incorporates industrial cyclicality with the corporate solvency ratio process to develop a state-dependent solvency ratio model with parameters varying according to the changes in the state of the industrial economy. A mean-reversion cyclicality process is established to provide...

Among the structural form credit models, this is one of the first few studies that suggest an intrinsic valuation approach that uses the present value of a firm's future cash flows instead of its equity market value to estimate its asset value distribution. We employ an industrial cyclicality...

Based upon the fact that most corporate strategic activities involve the exchange of assets, this study develops an analytical framework that can be applied to analyze the effectiveness and soundness of various types of strategic activities such as: the expansion activities which include...