Corporate Distress and Restructuring with Macroeconomic Fluctuations: The Cases of GM and Ford
(2012) In Journal of Applied Finance 22(1). p.71-88- Abstract
- Although macroeconomic factors are part of several models for evaluation of credit risk, there is little effort to distinguish between effects of such factors and "intrinsic" factors on changes in credit risk. We argue that lenders, management, courts and traders in distressed securities would benefit from information about the degree to which macroeconomic factors affect changes in the likelihood of default in order to determine an effective approach to resolving a distress situation. A model for decomposing changes in default predictions into macroeconomic and intrinsic factors is presented. The decomposition is firm-specific in order to capture the differential impact of the macro environment on firms. The model is applied to Z-scores... (More)
- Although macroeconomic factors are part of several models for evaluation of credit risk, there is little effort to distinguish between effects of such factors and "intrinsic" factors on changes in credit risk. We argue that lenders, management, courts and traders in distressed securities would benefit from information about the degree to which macroeconomic factors affect changes in the likelihood of default in order to determine an effective approach to resolving a distress situation. A model for decomposing changes in default predictions into macroeconomic and intrinsic factors is presented. The decomposition is firm-specific in order to capture the differential impact of the macro environment on firms. The model is applied to Z-scores of GM and Ford during the period 1996-2008. The macro-economy has affected the two firms in different ways with implications for managements' and creditors' approaches to restoring their financial health. (Less)
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/record/2223760
- author
- Oxelheim, Lars LU and Wihlborg, Clas
- organization
- publishing date
- 2012
- type
- Contribution to journal
- publication status
- published
- subject
- keywords
- Macroeconomics, Credit risk, Moneylenders, Securities markets, Debtor & creditor
- in
- Journal of Applied Finance
- volume
- 22
- issue
- 1
- pages
- 71 - 88
- publisher
- Financial Management Association International (FMA)
- ISSN
- 1534-6668
- language
- English
- LU publication?
- yes
- id
- 11066a12-7688-4c2a-869d-9b9da2f2681e (old id 2223760)
- date added to LUP
- 2016-04-01 14:23:50
- date last changed
- 2018-11-21 20:26:25
@article{11066a12-7688-4c2a-869d-9b9da2f2681e,
abstract = {{Although macroeconomic factors are part of several models for evaluation of credit risk, there is little effort to distinguish between effects of such factors and "intrinsic" factors on changes in credit risk. We argue that lenders, management, courts and traders in distressed securities would benefit from information about the degree to which macroeconomic factors affect changes in the likelihood of default in order to determine an effective approach to resolving a distress situation. A model for decomposing changes in default predictions into macroeconomic and intrinsic factors is presented. The decomposition is firm-specific in order to capture the differential impact of the macro environment on firms. The model is applied to Z-scores of GM and Ford during the period 1996-2008. The macro-economy has affected the two firms in different ways with implications for managements' and creditors' approaches to restoring their financial health.}},
author = {{Oxelheim, Lars and Wihlborg, Clas}},
issn = {{1534-6668}},
keywords = {{Macroeconomics; Credit risk; Moneylenders; Securities markets; Debtor & creditor}},
language = {{eng}},
number = {{1}},
pages = {{71--88}},
publisher = {{Financial Management Association International (FMA)}},
series = {{Journal of Applied Finance}},
title = {{Corporate Distress and Restructuring with Macroeconomic Fluctuations: The Cases of GM and Ford}},
volume = {{22}},
year = {{2012}},
}