2002 Fiscal Year Final Research Report Summary
Relationship between Changes in the Economic Environment and Financial Ratios: Empirical Study of Bankrupt Firms
| Project/Area Number |
12630161
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| Research Category |
Grant-in-Aid for Scientific Research (C)
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| Allocation Type | Single-year Grants |
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| Section | 一般 |
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| Research Field |
Accounting
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| Research Institution | Nihon University, College of Economies (2001-2002)
Tsukuba College of Technology (2000) |
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Principal Investigator |
SHIRATA Yoshiko Ninon University, College of Economies, Professor, 経済学部, 教授 (80289793)
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| Project Period (FY) |
2000 – 2002
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| Keywords | Financial Ratios / Economic Environment / Bankruptcy Prediction |
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| Research Abstract |
In this research, the relation between each financial ratio and changes in the economic environment has been elucidated through time-series observations of financial ratios in bankrupt companies. As a result, it has been demonstrated that some financial ratios are affected by changes in the economic environment and also that there are financial ratios in which figures fluctuate considerably depending on the time period, although it is yet to be adequately confirmed if they are directly affected by any change in the economic environment.
This research also uncovered the existence of financial ratios that are not affected by changes in the economic environment and also that distinctively present tendencies specific to companies near bankruptcy. Some criticize that an attempt to extract ratios that are statistically significant for bankruptcy detection in a univariate setting is not any different from Beaver[1967]'s research work. As, however, researchers have concentrated much on constructing a model and have used financial ratios that may show reverse distribution patterns, which contradict relevant theories, depending on some changes in the economic environment, as was the case in the Altman model [1968], analysis with regards to characteristics contained by each ratio has been unduly neglected up to now. This research revealed being statistically significant is different from being significant in the light of accounting.
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