Financial Statement Analysis and the Prediction of Financial Distress

by William H. Beaver

Financial Statement Analysis and the Prediction of Financial Distress discusses the evolution of three main streams within the financial distress prediction literature: the set of dependent and explanatory variables used, the statistical methods of estimation, and the modeling of financial distress. Section 1 discusses concepts of financial distress. Section 2 discusses theories regarding the use of financial ratios as predictors of financial distress. Section 3 contains a brief review of the literature. Section 4 discusses the use of market price-based models of financial distress. Section 5 develops the statistical methods for empirical estimation of the probability of financial distress. Section 6 discusses the major empirical findings with respect to prediction of financial distress. Section 7 briefly summarizes some of the more relevant literature with respect to bond ratings. Section 8 presents some suggestions for future research and Section 9 presents concluding remarks.

90 pages, ebook

First published June 30, 2011

About the author

William Henry Beaver was an accounting researcher and educator. He was the Joan E. Horngren Professor of Accounting, Emeritus, at Stanford University. Early in his career, he was a professor at the University of Chicago.
He served as president of the American Accounting Association from 1979 to 1981.
In 1989, he was awarded the Seminal Contributions in Accounting Literature Award for his article "Information Content of Annual Earnings Announcements" published in Journal of Accounting Research in 1968.
He received the Outstanding Accounting Educator Award of the American Accounting Association in 1990.
In 1996, he was one of three inductees to the Accounting Hall of Fame.