Default probabilities of privately held firms
- Authors
- Duan, Jin-Chuan; Kim, Baeho; Kim, Woojin; Shin, Donghwa
- Issue Date
- Sep-2018
- Publisher
- ELSEVIER SCIENCE BV
- Keywords
- Default probability; Term structure; Privately held firm; Interest charge
- Citation
- JOURNAL OF BANKING & FINANCE, v.94, pp 235 - 250
- Pages
- 16
- Indexed
- SSCI
SCOPUS
- Journal Title
- JOURNAL OF BANKING & FINANCE
- Volume
- 94
- Start Page
- 235
- End Page
- 250
- URI
- https://scholar.korea.ac.kr/handle/2021.sw.korea/73249
- DOI
- 10.1016/j.jbankfin.2018.08.006
- ISSN
- 0378-4266
1872-6372
- Abstract
- We estimate the term structures of the default probabilities for private firms using data consisting of 1759 default events from 29,894 firms between 1999 and 2014. Each firm's default likelihood is characterized by a forward intensity model employing macro risk factors and firm-specific attributes. As private firms do not have traded stock prices, we devise a methodology to obtain a public-firm equivalent distance-to-default by projection that references the distance-to-defaults of public firms with comparable attributes. The fitted model provides accurate multi-period forecasts of defaults, leading to both economically and statistically significant benefits over benchmark models. The reported interest rates charged to private firms are reflective of the estimated default term structure. (C) 2018 Elsevier B.V. All rights reserved.
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Collections - Korea University Business School > Department of Business Administration > 1. Journal Articles

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