ON DE FINETTI'S OPTIMAL IMPULSE DIVIDEND CONTROL PROBLEM UNDER CHAPTER 11 BANKRUPTCY

Motivated by recent advances made in the study of dividend control and risk management problems involving the U.S.bankruptcy code,in this paper we follow[44]to revisit the De Finetti dividend control problem under the reorganization process and the regulator's intervention documented in U.S.Chapter 11 bankruptcy.We do this by further accommodating the fixed transaction costs on dividends to imitate the real-world procedure of dividend payments.Incorporating the fixed transaction costs transforms the targeting optimal dividend problem into an impulse control problem rather than a singular control problem,and hence computations and proofs that are distinct from[44]are needed.To account for the financial stress that is due to the more subtle concept of Chapter 11 bankruptcy,the surplus process after dividends is driven by a piece-wise spectrally negative Lévy process with endogenous regime switching.Some explicit expressions of the expected net present values under a double barrier dividend strategy,new to the literature,are established in terms of scale functions.With the help of these expressions,we are able to characterize the optimal strategy among the set of admissible double barrier dividend strategies.When the tail of the Lévy measure is log-convex,this optimal double barrier dividend strategy is then verified as the optimal dividend strategy,solving our optimal impulse control problem.

Re-estimation and comparisons of alternative accounting based bankruptcy prediction models for Indian companies

Background:The suitability and performance of the bankruptcy prediction models is an empirical question.The aim of this paper is to develop a bankruptcy prediction model for Indian manufacturing companies on a sample of 208 companies consisting of an equal number of defaulted and non-defaulted firms.Out of 208 companies,130 are used for estimation sample,and 78 are holdout for model validation.The study reestimates the accounting based models such as Altman EI(Journal of Finance 23:19189-209,1968)Z-Score,Ohlson JA(Journal of Accounting Research 18:109-131,1980)Y-Score and Zmijewski ME(Journal of Accounting Research 22:59-82,1984)X-Score model.The paper compares original and re-estimated models to explore the sensitivity of these models towards the change in time periods and financial conditions.Methods:Multiple Discriminant Analysis(MDA)and Probit techniques are employed in the estimation of Z-Score and X-Score models,whereas Logit technique is employed in the estimation of Y-Score and the newly proposed models.The performance of all the original,re-estimated and new proposed models are assessed by predictive accuracy,significance of parameters,long-range accuracy,secondary sample and Receiver Operating Characteristic(ROC)tests.Results:The major findings of the study reveal that the overall predictive accuracy of all the three models improves on estimation and holdout sample when the coefficients are re-estimated.Amongst the contesting models,the new bankruptcy prediction model outperforms other models.Conclusions:The industry specific model should be developed with the new combinations of financial ratios to predict bankruptcy of the firms in a particular country.The study further suggests the coefficients of the models are sensitive to time periods and financial condition.Hence,researchers should be cautioned while choosing the models for bankruptcy prediction to recalculate the models by looking at the recent data in order to get higher predictive accuracy.

Incorporating Anglo-American Reorganization Provisions in Bankruptcy Law： A 10-year Lesson From Thailand

This paper examines the appropriateness of the adoption of Anglo-American type of reorganization provisions into national bankruptcy law using Thailand as a sample. It argues that such adoption shall be cautious. Since Thailand started to accommodate such provisions, reorganization, apparently, has limited usefulness--benefitting only large-scale debtors because it does not fit with the nature of Thai business culture, i.e., the borrowing-lending relationship and less-than-arm＇s length business connections. On average, only every one in 200 bankruptcy cases employs reorganization; the rest goes for liquidation but the average outstanding debt in reorganization is over 30 times higher than liquidation. Interestingly, the adjudication rate of reorganization is faster than those of liquidation. Debtors＇ strategic use of the law and the procedural bias are suspected. Debt restructuring led by the central bank in cooperation with commercial banks, instead, is overwhelmingly more successful, equally efficient, and effective because any ailing firm can renegotiate its borrowing contract rather easily in the low transaction cost environment. Debt restructuring outperformed reorganization roughly 800 and two times in terms of cases and debt amount respectively. Thus, the adoption of non-indigenous provisions shall be made prudently. This argument applies towards the standardization of insolvency legislation. Standardizing bankruptcy procedures shall be made carefully and national economic conditions including local business nature and uniqueness are worth examined before any enactment or amendment. Otherwise, benefits of international trade and investment would be achieved at the expense of economic efficiency.

Economic Bankruptcy of the Industries in Mato Grosso,Brazil

Data from the Commercial Registry of the Mato Grosso State(JUCEMAT)indicate that the number of bankrupted industries exceeded 16 thousand between 2006 and 2016.This is a high number,to the point of questioning which particularities are related with the economic bankruptcy in the State.The objective of this study is precisely to analyse the profile of these industries that closed their activities in Mato Grosso,considering the estimated survival rate for the extraction and transformation segments.Also,based on the underlying indicators of factor analysis,the crucial factors for the economic bankruptcy of micro and small enterprises in the state are delineated.The main results point to the generalized consequences arising from the main economic crises,with more aggressive effects for the microenterprises of sand,gravel,and cobble extraction.Aggravated problems included also the food and logging industries,the main activities of the local economy,with more pronounced impacts in the South,Southeast,North and Central-North regions of Mato Grosso.The survival rate declined considerably between 2006 and 2008 and,despite recovery in the following period,it has not yet recovered its best performance.In the case of micro and small transformation industries,the results point to a group with limited managerial capacity and lack of strategic planning before the execution of the main stages of production and commercialization.

Fixed Assets Valuation in the Condition of Bankruptcy Risk： The Role of Estimates

One of the most important issues relating to the economic activity of an enterprise is a reliable valuation of assets. It is also one of the key elements in the condition of bankruptcy risk. The aim of this paper is to present the results of the author＇s empirical research concerning the usefulness of the estimates in the valuation of fixed assets held by the enterprises facing bankruptcy. The empirical research was carried out on a group of 100 companies on which courts declared bankruptcy in 2011 in Poland. The study sample constitutes 14% of the population and is a significant representation of the phenomenon. For comparisons of the carrying amounts and the estimated values, the assets recognized in the balance sheet under ＂property, plant, and equipment （PPE）＂ were selected. During the first stage of the research, the significance of PPE in bankruptcy proceedings was confirmed by comparing the share of their value within the estate with the costs of the proceedings recorded as a percentage of the value of the debtor＇s estate. In the next stage of the research, comparisons between the carrying amounts and the estimated values were made. Simple regression models were constructed. The research results confirm that in the case of a substantial doubt about an entity＇s ability to continue as a going concern, the informative value of financial statements is limited and the estimates of the fixed assets value are of fundamental importance.

Bankruptcy Prediction for Chinese Firms： Comparing Data Mining Tools With Logit Analysis

China＇s capital market is different from that of the US in economic, political, and socio-cultural ways. China＇s dynamic and fast growing economy for the past decade entails some structural changes and weaknesses and as a consequence, there are some business failures. We propose bankruptcy prediction models using Chinese firm data via several data mining tools and traditional logit analysis. We used Chinese firm data one year prior to bankruptcy and our results suggest that the financial variables developed by Altman （1968） and Ohlson （1980） perform reasonably well in determining business failures of Chinese firms, but the overall prediction rate is low compared with those of the US or other countries＇ studies. The reasons for this low prediction rate may be structural weaknesses resulting from China＇s fast growth and immature capital market.

A Statistical Analysis of Reliability of Audit Opinions as Bankruptcy Predictors

This research measures the reliability of audit firms in predicting bankruptcy for United States （US） listed financial institutions. The object of analysis is the going concern opinion （GCO）, widely considered as a bankruptcy warning signal to stakeholders. The sample is composed of 42 US listed financial companies that filed for Chapter 11 between 1998 and 2011. To highlight the differences between bankrupting and healthy firms, a matching sample composed of 42 randomly picked healthy US listed financial companies is collected. We concentrate on financial institutions, whereas the existing literature pays considerably greater attention to the industrial sector. This research imbalance is remarkable and particularly unexpected in the wake of recent financial scandals. Literature points out two main approaches on bankruptcy prediction： （1） purely mathematical; and （2） approaches based on a combination of auditor knowledge, expertise, and experience. The use of data mining techniques allows us to benefit from the best features of both approaches. Statistical tools used in the analysis are： Logit regression, support vector machines （SVMs）, and an AdaBoost meta-algorithm. Findings show a quite low reliability of GCOs in predicting bankruptcy. It is likely that auditors consider further information in supporting their audit opinions, aside from financial-economic ratios. The scant predictive ability of auditors might be due to critical relationships with distressed clients, as suggested by recent literature.

The Prediction of Bankruptcy in a Construction Industry of Russian Federation

The problem of the firm bankruptcy prediction was investigated by foreign researchers in the 1930s and it still remains relevant. Since the publishing of Altman＇s （1968） major work, based on multiple discriminant analysis （MDA）, this methodological area has considerably changed. Taking into consideration that new data have appeared in the course of time, companies＇ average size has changed, and the accounting standards have changed （Altman, Haldeman, ＆ Narayanan, 1977）, methods and models should be renewed so as to be appropriate for current situation. The purpose of this paper1 is to reveal factors causing bankruptcy and use models appropriate for prediction bankruptcy in the area of a construction industry during the financial crisis. This investigation has been carried out on the basis of logit and probit analysis. The main reasons of bankruptcy revealed in the course of this investigation are the following： （1） non-optimal capital structure formation; （2） ineffective liquidity management; （3） decrease in assets profitability; and （4） decrease in short-term assets turnover. The most reliable indicators which give warning of bankruptcy ahead of others are financial instability and liquidity ratios.

Research on the Performance of Listed Companies＇ Bankruptcy Reorganization -Taking HULUDAO ZINC INDUSTRY CO.,LTD. as an Example

Bankruptcy Reorganization is a legal system to regenerate enterprises that meet the requirements of bankruptcy but have the ability to survive. Since the implementation of Bankruptcy law in 2007？to the end of 2016, there are already 75 listed companies in the bankruptcy reorganization process to rectify the operation. Bankruptcy Reorganization is becoming an important way for some enterprises to get rid of their difficulties. However, whether the enterprises after the bankruptcy reorganization can really get reborn is worth further study. This article uses HULUDAO ZINC INDUSTRY CO.,LTD. as an example, examines the financial performance and market performance of the company before and after the bankruptcy reorganization, and verifies the effect of the bankruptcy reorganization system in order to provide guidance and suggestions for improving the system of bankruptcy reorganization of the listed companies.

The Simple Math Error That Can Lead To Bankruptcy

Fifteen years ago,the people of Italy experienced a strange kind of mass hysteria known as"53 fever".The madness centered on the country’s lottery.Players can choose between 11 different wheels,based in cities such as Bari,Naples or Venice.Once you have picked which wheels to play,you can then bet on a selection of numbers between 1 and90.Your winnings depend on how much you initially bet,how many numbers you picked and how many you got right.Sometime in 2003,however,the number 53 simply stopped coming up on the Venice wheel-leading punters to place increasingly big bets on the number in the certainty that it must soon make a reappearance.By early 2005,53 fever had apparently led thousands to their financial ruin,the pain of which resulted in a spate of suicides.The hysteria only died away when it finally came up in the 9 February draw,after182 no-shows and four billion euros worth of bets.

The choice between bankruptcy liquidation and bankruptcy reorganization: a model and evidence

This paper proposes a two-period model to examine which bankruptcy procedure is better for both the debtor and creditor when insolvency happens.Our theoretical model depicts how firm size,industry characteristics,equity structure,and debt structure determine firms’bankruptcy resolutions.Using a comprehensive sample of bankrupt firms in the United States,we verify the predictions of a theoretical model.In our study,we deploy Probit and Logit models to address the predictions in the theoretical framework and conduct a series of robustness checks with econometric methods like Propensity Score Matching to confirm the empirical results.This paper finds that firms with larger size have more chance to file for Chapter 11 reorganization when insolvency happens.We also find that firms in asset-heavy(asset-light)industries are more likely to be reorganized(liquidated)under U.S.bankruptcy code.

A“Going Concern”and the Need to Fully Integrate Economics in the Business School Curriculum

In response to the recommendation by the American Assembly of Collegiate Schools of Business(AACSB,2002),which urged business schools to embark on interdisciplinary programs to facilitate boundary-spanning teaching and learning,many colleges have conducted one form of curriculum integration or the other.Many of these team-taught course integrations,however,concentrate on core business courses without reaching out to related courses in other disciplines.Moreover,due to some factors,the informational contents of management disclosures in annual reports and audit unqualified opinions may not align with the future viability of an enterprise.Using a“going concern concept”,this paper demonstrates how the addition of economics in business school curriculum integration could produce well-rounded business graduates.Economics concepts could unambiguously support the tests that cast doubts on firms’ability to continue operations.

Industry characteristics,court location,and bankruptcy resolution

Insolvent firms usually file for formal bankruptcy protection under either liquidation or reorganization.Reorganization aims to save viable failing firms whereas liquidation focuses on filtering out unviable failing firms.This paper theoretically and empirically investigates the determinants of formal bankruptcy resolution.We present a concise theory to reveal the theoretical boundary between liquidation and reorganization,which reflects how industry characteristics,judicial bias,and firm characteristics affect the outcome of bankruptcy resolution.By using the commercial bankruptcy data on US courts(2000–2016),we validate the proposed theory.In empirical tests,we deploy discrete-choice models to address the main predictions derived from theory and conduct robustness checks(e.g.placebo test).We document that firms are more likely to be reorganized when their industry is experiencing prosperity.Firms in asset-heavy industries(e.g.hotels,mining,and oil)tend to be reorganized.Formal resolution of bankruptcy cases handled by courts in Alaska and Hawaii are more likely to be reorganization than is the case in other states;however,firms that file bankruptcy petitions in California courts are more likely to face liquidation.Finally,larger and more transparent firms are more likely to be reorganized.

ESTIMATION OF CHAIN REACTION BANKRUPTCY STRUCTURE BY CHANCE DISCOVERY METHO—WITH TIME ORDER METHOD AND DIRECTED KEYGRAPH

Chain reaction bankruptcy is regarded as common phenomenon and its effect is to be taken into account when credit risk portfolio is analyzed. But consideration and modeling of its effect leave much room for improvement. That is mainly because method for grasping relations among companies with limited data is underdeveloped. In this article, chance discovery method is applied to estimate industrial relations that are to include companies＇ relations that transmit chain reaction of bankruptcy. Time order method and directed KeyGraph are newly introduced to distinguish and express the time order among defaults that is essential information for the analysis of chain reaction bankruptcy. The steps for the data analysis are introduced and result of example analysis with default data in Kyushu, Japan, 2005 is presented. The structure estimated by the new method is compared with the structure of actual account receivable holders of bankrupted companies for evaluation.

Beyond the Shadow of the Law： Firm Insolvency, State-Building, and the New Policy Bankruptcy Reform in Late Qing Chongqing

This paper modifies the historical assessment of the 1906 Qing Bankruptcy Code by proposing a new approach to the history of commercial dispute resolution. It argues that the Qing bankruptcy reform cannot be understood by evaluating only published sources, and that a thorough understanding of dispute mediation techniques must serve as a foundation for assessing the historical importance of the law. It offers a description of Qing insolvency dispute practices by providing an analysis of cases from the Ba county archives. The results of that analysis suggest that, although the Qing Bankruptcy Code was repealed soon after its introduction, the reform ambitions behind the new legislation were realized through the implementation of another New Policy reform, which allowed chambers of commerce to resolve bankruptcy disputes differently. This conclusion suggests that the basic vision of the Qing economic reforms of the New Policy movement had more of a lasting impact than has been assumed to date.

The joint impact of bankruptcy costs, fire sales and cross-holdings on systemic risk in financial networks

The paper presents a comprehensive model of a banking system that integrates network effects,bankruptcy costs,fire sales,and cross-holdings.For the integrated financial market we prove the existence of a price-payment equilibrium and design an algorithm for the computation of the greatest and the least equilibrium.The number of defaults corresponding to the greatest price-payment equilibrium is analyzed in several comparative case studies.These illustrate the individual and joint impact of interbank liabilities,bankruptcy costs,fire sales and cross-holdings on systemic risk.We study policy implications and regulatory instruments,including central bank guarantees and quantitative easing,the significance of last wills of financial institutions,and capital requirements.

OPTIMAL RISK CONTROL POLICIES FOR DIFFUSION MODELS WITH NON-CHEAP PROPORTIONAL REINSURANCE AND BANKRUPTCY VALUE

This paper considers the problem about optimization of proportional reinsurance in the setting of diffusion models. The authors take into account non-cheap proportional reinsurance and bankruptcy value simultaneously. The objective is to find the risk control policies which maximize the total discounted reserve and the bankruptcy value. Results show that, the optimal risk control policies and corresponding optimal return functions vary, depending both on the range of bankruptcy value and the relationship between the premium rate of insurance and that of reinsurance.

On the bankruptcy of private higher education institutions in China

In recent years,closing down private higher education institutions(HEIs)has become a serious problem in China.It seems that doubt is cast on the rationality of private HEIs and severe competition contributes a lot to their development.Many problems in the process of self-development are caused by both internal and external factors.From the perspective of sustainable development and the healthy development of students,priority should be given to the evolution of an idea to provide a positive environment for the development of private HEIs.This paper is an effort to deal with the statement that higher education in China is a seller’s market and aims to do an objective estimate of the development space for private HEIs.In addition,it shows a clear understanding of establishing the prediction system for relevant issues of private higher education to guarantee the sound development of private HEIs.