Review of Accounting Studies

, Volume 14, Issue 4, pp 534-558

First online:

Bankruptcy prediction: the case of Japanese listed companies

  • Ming XuAffiliated withSchool of Accounting and Finance, The Hong Kong Polytechnic University Email author 
  • , Chu ZhangAffiliated withDepartment of Finance, The Hong Kong University of Science and Technology

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This paper investigates if bankruptcy of Japanese listed companies can be predicted using data from 1992 to 2005. We find that the traditional measures, such as Altman’s (J Finance 23:589–609, 1968) Z-score, Ohlson’s (J Accounting Res 18:109–131, 1980) O-score and the option pricing theory-based distance-to-default, previously developed for the U.S. market, are also individually useful for the Japanese market. Moreover, the predictive power is substantially enhanced when these measures are combined. Based on the unique Japanese institutional features of main banks and business groups (known as Keiretsu), we construct a new measure that incorporates bank dependence and Keiretsu dependence. The new measure further improves the ability to predict bankruptcy of Japanese listed companies.


Bankruptcy risk measure Accounting information Option pricing theory Japanese listed companies Bank dependence Keiretsu

JEL Classifications

G15 G33