Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
1004234 | The British Accounting Review | 2007 | 19 Pages |
Abstract
This study evaluates the theoretical and empirical significance of the multinomial nested logit (NL) model as an advanced closed-form model for the explanation and prediction of firm financial distress. Using a four-state failure model based on Australian company samples, we estimate an NL model and test its predictive performance on a holdout sample. Comparison of model fits and out-of-sample forecasts indicate that the unordered NL model statistically outperforms a standard logit model by substantial margins. NL may even be used as an effective practical alternative to more advanced open-form models such as mixed logit in the modelling of firm financial distress.
Keywords
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Social Sciences and Humanities
Business, Management and Accounting
Accounting
Authors
Stewart Jones, David A. Hensher,