2012

Corporate Distress and Restructuring with Macroeconomic Fluctuations: The Cases of GM and Ford

Reprint No. 2012:13

Author(s): Lars Oxelheim and Clas WihlborgYear: 2012 Title: Journal of Applied Finance Volume (No.): 22 (1) Pages: 71–88
Online article (restrictions may apply)
Preliminary version


Although macroeconomic factors are part of several models for evaluation of credit risk, there is little effort to distinguish between effects of such factors and “intrinsic” factors on changes in credit risk. We argue that lenders, management, courts and traders in distressed securities would benefit from information about the degree to which macroeconomic factors affect changes in the likelihood of default in order to determine an effective approach to resolving a distress situation. A model for decomposing changes in default predictions into macroeconomic and intrinsic factors is presented. The decomposition is firm-specific in order to capture the differential impact of the macro environment on firms. The model is applied to Z-scores of GM and Ford during the period 1996-2008. The macro-economy has affected the two firms in different ways with implications for managements’ and creditors’ approaches to restoring their financial health.

 

 


Reference:
Oxelheim, Lars and Clas Wihlborg (2012), "Corporate Distress and Restructuring with Macroeconomic Fluctuations: The Cases of GM and Ford". Journal of Applied Finance 22(1), 71–88.

Lars Oxelheim

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Interdisciplinary European Studies

Trust in the European Union in Challenging Times

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This is the first book in the Interdisciplinary European Studies collection. This volume provides an interdisciplinary perspective on trust in the EU from the vantage point of political science, law and economics. Lars Oxelheim, Lund University and affiliated to IFN, is one of the authors.

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