000050146 001__ 50146
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000050146 0247_ $$2doi$$a10.22004/ag.econ.50146
000050146 037__ $$a1076-2016-87135
000050146 037__ $$a1076-2016-87260
000050146 041__ $$aeng
000050146 084__ $$aG30
000050146 084__ $$aG33
000050146 245__ $$aUnderstanding Differences Between Financial Distress and Bankruptcy
000050146 260__ $$c2006
000050146 269__ $$a2006
000050146 270__ $$mh.platt@neu.edu$$pPlatt,   Harlan D.
000050146 300__ $$a17
000050146 336__ $$aJournal Article
000050146 520__ $$aFor the most part, research purporting to address the issue of financial distress has actually studied samples of bankrupt companies. Financial distress and bankruptcy are different. In contrast, this paper starts with a sample of companies that are financially distressed but not yet bankrupt. The sample was obtained by screening the Compustat industry database with a three-tiered identification system. The screen bifurcated companies into financially and non-financially distressed groups. A multi-tiered screen reduces the incidence of mistakenly identifying a non-distressed company as financially distressed. The paper then compares factors indicating the likelihood of future bankruptcies to those indicating future financial distress. To do this, an early warning financial-distress model was developed and compared to a methodologically similar existent model of bankruptcy. The final financial distress model included only one variable present in the bankruptcy model and four new variables. The limited overlap of explanatory factors between the models questions the similarity of financial distress and bankruptcy. Statistical tests lend support to the notion that the bankruptcy process is not just a continuation of a downward spiraling cycle of financial distress. Our hypothesis is that financial distress is something that happens to companies as a consequence of operating decisions or external forces while bankruptcy is something that companies choose to do to protect their assets from creditors.
000050146 650__ $$aFinancial Economics
000050146 6531_ $$afinancial distress
000050146 6531_ $$aearly warning model
000050146 6531_ $$arenewal
000050146 700__ $$aPlatt, Harlan D.
000050146 700__ $$aPlatt, Marjorie B.
000050146 773__ $$q141$$o157$$tReview of Applied Economics$$j02$$k2$$d2006
000050146 8564_ $$9b1fc8d1c-70cb-43f9-bc31-30c168ebe532$$s150901$$uhttps://ageconsearch.umn.edu/record/50146/files/1-Harlan%20D%20Platt.pdf
000050146 887__ $$ahttp://purl.umn.edu/50146
000050146 909CO $$ooai:ageconsearch.umn.edu:50146$$pGLOBAL_SET
000050146 912__ $$nSubmitted by Amber  Besch (besch014@umn.edu) on 2009-05-20T13:14:11Z
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  Previous issue date: 2006
000050146 913__ $$aLicense granted by Amber  Besch (besch014@umn.edu) on 2009-05-20T13:06:15Z (GMT):

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000050146 980__ $$a1076
000050146 982__ $$gReview of Applied Economics>Volume 2, Number 2, 2006