Examining what best explains corporate credit risk: accounting-based versus market-based models
This paper uses a sample of 2,186 credit default swap spreads quoted in the European market during the period 2002–2009 to empirically analyze which model – accounting- or market-based – better explains corporate credit risk. We find little difference in the explanatory power of these two approaches...
| Main Authors: | , , |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
Vilnius Gediminas Technical University
2014-04-01
|
| Series: | Journal of Business Economics and Management |
| Subjects: | |
| Online Access: | https://journals.vgtu.lt/index.php/JBEM/article/view/3014 |
| _version_ | 1818903633604902912 |
|---|---|
| author | Antonio Trujillo-Ponce Reyes Samaniego-Medina Clara Cardone-Riportella |
| author_facet | Antonio Trujillo-Ponce Reyes Samaniego-Medina Clara Cardone-Riportella |
| author_sort | Antonio Trujillo-Ponce |
| collection | DOAJ |
| description | This paper uses a sample of 2,186 credit default swap spreads quoted in the European market during the period 2002–2009 to empirically analyze which model – accounting- or market-based – better explains corporate credit risk. We find little difference in the explanatory power of these two approaches. Our results indicate that a comprehensive model that combines accounting- and market-based variables is the best option to explain the credit risk, suggesting that both types of data are complementary. We also demonstrate that the explanatory power of credit risk models is particularly strong during periods of high uncertainty, such as those experienced in the recent financial crisis. Finally, the comprehensive model continues to produce the best results if the credit rating is used as the proxy for credit risk; however, accounting variables currently appear to have a more important role than market variables in determining corporate credit ratings.
First published online: 05 Feb 2013 |
| first_indexed | 2024-12-19T20:54:39Z |
| format | Article |
| id | doaj.art-f7e8956500ba4570b23b594d12114752 |
| institution | Directory Open Access Journal |
| issn | 1611-1699 2029-4433 |
| language | English |
| last_indexed | 2024-12-19T20:54:39Z |
| publishDate | 2014-04-01 |
| publisher | Vilnius Gediminas Technical University |
| record_format | Article |
| series | Journal of Business Economics and Management |
| spelling | doaj.art-f7e8956500ba4570b23b594d121147522022-12-21T20:06:01ZengVilnius Gediminas Technical UniversityJournal of Business Economics and Management1611-16992029-44332014-04-0115210.3846/16111699.2012.720598Examining what best explains corporate credit risk: accounting-based versus market-based modelsAntonio Trujillo-Ponce0Reyes Samaniego-Medina1Clara Cardone-Riportella2Department of Financial Economics and Accounting, Pablo de Olavide University, Carretera de Utrera Km 1, 41013 Seville, SpainDepartment of Financial Economics and Accounting, Pablo de Olavide University, Carretera de Utrera Km 1, 41013 Seville, SpainDepartment of Business Administration, Carlos III University of Madrid, Calle Madrid 126, 28903 Getafe, Madrid, SpainThis paper uses a sample of 2,186 credit default swap spreads quoted in the European market during the period 2002–2009 to empirically analyze which model – accounting- or market-based – better explains corporate credit risk. We find little difference in the explanatory power of these two approaches. Our results indicate that a comprehensive model that combines accounting- and market-based variables is the best option to explain the credit risk, suggesting that both types of data are complementary. We also demonstrate that the explanatory power of credit risk models is particularly strong during periods of high uncertainty, such as those experienced in the recent financial crisis. Finally, the comprehensive model continues to produce the best results if the credit rating is used as the proxy for credit risk; however, accounting variables currently appear to have a more important role than market variables in determining corporate credit ratings. First published online: 05 Feb 2013https://journals.vgtu.lt/index.php/JBEM/article/view/3014bankruptcycredit default swapscredit ratingcredit riskdistance-to-defaultEuropean companies |
| spellingShingle | Antonio Trujillo-Ponce Reyes Samaniego-Medina Clara Cardone-Riportella Examining what best explains corporate credit risk: accounting-based versus market-based models Journal of Business Economics and Management bankruptcy credit default swaps credit rating credit risk distance-to-default European companies |
| title | Examining what best explains corporate credit risk: accounting-based versus market-based models |
| title_full | Examining what best explains corporate credit risk: accounting-based versus market-based models |
| title_fullStr | Examining what best explains corporate credit risk: accounting-based versus market-based models |
| title_full_unstemmed | Examining what best explains corporate credit risk: accounting-based versus market-based models |
| title_short | Examining what best explains corporate credit risk: accounting-based versus market-based models |
| title_sort | examining what best explains corporate credit risk accounting based versus market based models |
| topic | bankruptcy credit default swaps credit rating credit risk distance-to-default European companies |
| url | https://journals.vgtu.lt/index.php/JBEM/article/view/3014 |
| work_keys_str_mv | AT antoniotrujilloponce examiningwhatbestexplainscorporatecreditriskaccountingbasedversusmarketbasedmodels AT reyessamaniegomedina examiningwhatbestexplainscorporatecreditriskaccountingbasedversusmarketbasedmodels AT claracardoneriportella examiningwhatbestexplainscorporatecreditriskaccountingbasedversusmarketbasedmodels |