Options Pricing Model Assessing the Probability of Bankruptcy

• Main Authors: Po-Chin Lee, 李柏嶔
• Other Authors: Song-Hong Lin
• Format: Others
• Language: zh-TW
• Published: 2006
• Online Access: http://ndltd.ncl.edu.tw/handle/85929359435884347075

碩士 === 國立成功大學 === 會計學系碩博士班 === 94 === There are several reasons to question the effectiveness of probability of bankruptcy measures that are based on accounting data. While probability of banrkruptcy estimates are statements about the likelihood of future events, the financial statements are designed to measure past performance and may not be very informative about the future status of the firm. Financial statements are formulated under the going-concern principle, which assumes that firm will not go bankrupt. Thus, their ability to accurately and reliably assess the probability of bankruptcy will be limited by design. Additionally, the conservatism principle often causes asset values to be understated relative to their market values, particularly for fixed and intangibles. Based on research of Hillegeist et al.(2004), this research use Option-Pricing Model to assess probability of bankruptcy. The firm’s equity can be viewed as a call option on the value of the firm’s assets. We assess whether the accounting-based measures effectively summarize publicly-available information about the probability of bankruptcy. Our tests show that Option-Pricing Model provides significantly more information than accounting-based measures.