Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5090962 | Journal of Banking & Finance | 2008 | 13 Pages |
Abstract
We introduce a new approach to improve the performance of rating prediction models for multinational corporations. In this segment, the low number of defaults poses a challenge, as it prevents rating models to be constructed for individual industry sectors or regions. We show that reducing group-level heterogeneity in financial ratios results in a rating prediction model with better performance than both unadjusted models and models adjusted by including industry dummies or other simpler procedures. Our approach fills a gap in cases where a limited dataset does not permit the construction of separate models for individual industries or regions.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Martin Niemann, Jan Hendrik Schmidt, Max Neukirchen,