A discrete-valued risk function for modelling financial distress in private Australian companies

Article Abstract:

This paper emphasizes the inappropriateness of continuous measure predictors for both the logit and MDA models when dealing with the measurement errors that exist in much of the private company data used to model financial distress in that sector. Also, it is argued that the step function logit model that we get as a consequence of the necessity to categorize the predictors, may be more appropriate in explaining underlying nonlinear behavior of firms at risk than the usual continuous response linear function. Within this context, the two models are compared using data from 140 private Australian companies. A logit model based on only three discrete-valued ratios gave an overall accuracy rate comparable to that of an existing continuous-valued multiple discriminant analysis (MDA) model based on six ratios. Of interest is the very different order of significance of the predictor ratios in the two models although neither model remains trustworthy for predictive purposes. (Reprinted by permission of the publisher.)

Models, Risk assessment, Forecasts and trends, Business failures

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The timeliness of half yearly earnings announcements and stock returns

Article Abstract:

This paper examines the association between the timeliness of the half-yearly report for Australian firms and the abnormal stock price behaviour around the time of the announcement. The results support the overseas evidence that reports containing 'good' news are released earlier than reports containing 'bad' news. The abnormal returns are consistent with the direction and magnitude of the earnings and dividend information. We find no evidence to support the Kross and Schroeder (1984) conclusion that timeliness per se is associated with abnormal returns once appropriate control is made for earnings/dividend information. (Reprinted by permission of the publisher.)

Prices and rates, Stocks, Influence, Stock prices, Corporation reports, Company reports

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Voluntary disclosure of segment information by Australian diversified companies

Article Abstract:

This paper reports an examination of economic incentives motivating listed diversified companies in Australia to voluntarily disclose segment information. The study is based on a sample of 65 listed diversified companies. Support is found for ownership diffusion, the level of minority interest in subsidiaries, firm size and industry membership as factors influencing the voluntary disclosure of segment information. No support is found for leverage or diversification into related versus unrelated industries. (Reprinted by permission of the publisher.)

Research, Financial disclosure

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