Econometrics - Antoine ARNAULD 1|Page Econometrics...

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Antoine ARNAULD 1 | P a g e
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Econometrics: Bankruptcy By analyzing the Bankruptcy file numbers, we want to determine if de Distress Dummy 1 is a result from the other parameters. Hence, we want to verify the following equation: Prob(Distress dummy=1)=f(debt to asset, employee growth rate,…) 1. Debt to assets The ratio “debt to asset” shows the proportion of assets that are financed by debts within a company. Debts/Assets < 1 Company is financed through equity. Debts/Assets > 1 Company is financed by debts (danger). Distress_ Dummy Method Mean 0 0.4694 1 0.6578 Diff (1-2) Pooled -0.1884 Diff (1-2) Satterthwaite -0.1884 There’s a positive correlation. T Value Pr > |t| -6.28 <.0001 -6.14 <.0001 Prob(|t|)=prob(H0 is true) = 0 For ∝ = % 5 , we reject H 0 and accept H 1 . 2 | P a g e
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2. Employee growth rate The Employee growth rate can be an image of the growth of a company. A growing structure is likely to employ. Distress_ Dummy Method Mean 0 0.0303 1 -0.0350 Diff (1-2) Pooled 0.0653 Diff (1-2) Satterthwaite 0.0653 There is a negative correlation.
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  • Spring '10
  • Sanchez
  • Balance Sheet, Generally Accepted Accounting Principles, Distress_ Dummy, H1.

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