Abstract
This paper describes an application of the multi-factor model to the analysis and prediction of corporate failure. The multi-factor model differs from the more usual methods of failure prediction because failure is conditioned on the values of a series of exogenous risk factors rather than on a series of “internal” financial ratio’s. Moreover, the multi-factor model is not primarily aimed at classifying firms in categories, but at modelling the influences of exogenous riskfactors, through sensitivities, on the firm’s cash flow generating process. The paper presents the general multi-factormodel and the conditional failure prediction model as bell as the possibilities to apply the model.
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Vermeulen, E.M., Spronk, J., van der Wijst, N. (1998). The Application of the Multi-Factor Model in the Analysis of Corporate Failure. In: Zopounidis, C. (eds) Operational Tools in the Management of Financial Risks. Springer, Boston, MA. https://doi.org/10.1007/978-1-4615-5495-0_4
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DOI: https://doi.org/10.1007/978-1-4615-5495-0_4
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