TY  - JOUR
AU  - Duffie,Darrell
AU  - Wang,Ke
TI  - Multi-Period Corporate Failure Prediction with Stochastic Covariates
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10743
PY  - 2004
Y2  - September 2004
UR  - http://www.nber.org/papers/w10743
L1  - http://www.nber.org/papers/w10743.pdf
N1  - Author contact info:
Darrell Duffie
Graduate School of Business
Stanford University
Stanford, CA  94305-5015
Tel: 650/723-1976
Fax: 650/725-7979
E-Mail: duffie@stanford.edu

Ke Wang
University of Tokyo
E-Mail: kewang@e.u-tokyo.ac.jp
AB  - We provide maximum likelihood estimators of term structures of conditional probabilities of bankruptcy over relatively long time horizons, incorporating the dynamics of firm-specific and macroeconomic covariates. We find evidence in the U.S. industrial machinery and instruments sector, based on over 28,000 firm-quarters of data spanning 1971 to 2001, of significant dependence of the level and shape of the term structure of conditional future bankruptcy probabilities on a firm's distance to default (a volatility-adjusted measure of leverage) and on U.S. personal income growth, among other covariates.Variation in a firm's distance to default has a greater relative effect on the term structure of future failure hazard rates than does a comparatively sized change in U.S. personal income growth, especially at dates more than a year into the future.
ER  -