Skip to Main Content
Corporate Financial Distress, Restructuring, and Bankruptcy, 4th Edition
book

Corporate Financial Distress, Restructuring, and Bankruptcy, 4th Edition

by Edward I. Altman, Edith Hotchkiss, Wei Wang
March 2019
Intermediate to advanced content levelIntermediate to advanced
368 pages
11h 58m
English
Wiley
Content preview from Corporate Financial Distress, Restructuring, and Bankruptcy, 4th Edition

CHAPTER 10A 50‐Year Retrospective on Credit Risk Models, the Altman Z‐Score Family of Models, and Their Applications to Financial Markets and Managerial Strategies

THE EVOLUTION OF CORPORATE CREDIT SCORING SYSTEMS

Credit scoring systems for identifying determinants of a firm's repayment likelihood probably go back to the days of the Crusades – when travelers needed “loans” to finance their travels – and certainly were used much later in the United States as companies and entrepreneurs helped to grow the economy, especially in its westward expansion. Primitive financial information was usually evaluated by lending institutions in the 1800s with the primary types of information required being subjective, or qualitative in nature, revolving around ownership and management variables and collateral (see Figure 10.1). It was not until the early 1900s that rating agencies and some more financially oriented corporate entities, for example, the DuPont System of corporate ROE growth, introduced univariate accounting measures and industry peer‐group comparisons, with rating designations (Figure 10.2). The key aspect of these “revolutionary” techniques was the ability of the analyst to compare an individual corporate entity's financial performance metrics to a reference database of time‐series (same entity) and cross‐section (industry) data. Then, and as even more so today, data and databases were the key element for meaningful diagnostics. There is no doubt that in the credit scoring ...

Become an O’Reilly member and get unlimited access to this title plus top books and audiobooks from O’Reilly and nearly 200 top publishers, thousands of courses curated by job role, 150+ live events each month,
and much more.
Start your free trial

You might also like

Corporate Finance Theory and Practice, Third Edition

Corporate Finance Theory and Practice, Third Edition

Pascal Quiry, Maurizio Dallocchio, Yann Le Fur, Antonio Salvi
Corporate Finance, 5th Edition

Corporate Finance, 5th Edition

Pierre Vernimmen, Pascal Quiry, Maurizio Dallocchio, Yann Le Fur, Antonio Salvi
Corporate Finance: A Practical Approach, Second Edition

Corporate Finance: A Practical Approach, Second Edition

CFA Michelle R. Clayman, CFA Martin S. Fridson, CFA George H. Troughton

Publisher Resources

ISBN: 9781119481805Purchase book