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| Author: | Demirovic, A. Thomas, D.C. |
| Title: | The relevance of accounting data in the measurement of credit risk |
| Journal: | European Journal of Finance
2007 : APR/JUN, VOL. 13:3-4, p. 253-268 |
| Index terms: | accounting credit risk measurement companies United Kingdom |
| Language: | eng |
| Abstract: | Assuming perfect market conditions, information relevant to the measurement of a firm's credit risk is reflected in its equity price, without a role for accounting data. This hypothesis is tested based on U.K. data and credit ratings as a proxy for credit risk. Among others, it is found that Merton's distance-to-default (henceforth as: d-to-d.) measure is the most significant variable in the credit risk measurement. It is also found, however, that accounting variables are incrementally informative when added to a model containing only the d-to-d. measure etc. |
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