A Study on a Discriminant Model of Bankruptcy Considering Equity and Dept

Abstract

The objective of this study is to investigate empirically the two different approaches to the modeling of discriminate bankruptcy. We present a discriminate model of bankruptcy considering the equity and debt for a corporation's decision-making needs. Though the daily equity values are considered as a corporate evaluation by investors in the stock market, we can estimate the daily equity values of a corporation using daily stock prices by a beta estimate technique. On the other hand, it is difficult to estimate the daily debt values because a corporation announces the annual debt values only at the time of settlement of accounts. But we estimate the daily debt values using the Black-Scholes Model, which is used in the field of finance to evaluate option prices. As a result, we can discriminate corporate bankruptcy daily using our present model, which is constructed using by implementing daily equity and debt values. We can Show the validity of our model the model using real-world data.