Accounting Fundamentals and Systematic Risk: Corporate Failure over the Business Cycle

• 成果类型: Article
• 署名作者: Ogneva, Maria; Piotroski, Joseph D.; Zakolyukina, Anastasia A.
• 署名单位: University of Southern California; Stanford University; University of Chicago
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr-52638
• 发表日期: 2020
• 页码: 321-350
• 关键词: FINANCIAL RATIOS; cross-section; default risk; DELISTING BIAS; Distress risk; stock returns; prediction; INFORMATION; equity; bankruptcy

摘要

In this paper, we use accounting fundamentals to measure systematic risk of distress. Our main testable prediction-that this risk increases with the probability of recessionary failure, P(RjF)-is based on a stylized model that guides our empirical analyses. We first apply the lasso method to select accounting fundamentals that can be combined into P(RjF) estimates. We then use the obtained estimates in asset-pricing tests. This approach successfully extracts systematic risk information from accounting data-we document a significant positive premium associated with P(RjF) estimates. The premium covaries with the news about the business cycle and aggregate failure rates. Additional tests underscore the importance of the structure'' imposed through recessionary-failure-probability estimation. The agnostic'' return predictor that relies only on past correlations between the same fundamental variables and returns exhibits markedly different properties.