Use this URL to cite or link to this record in EThOS:
Title: Cash flow based bankruptcy risk and stock returns in the US computer and electronics industry
Author: Kregar, Michael
ISNI:       0000 0004 2718 7776
Awarding Body: University of Manchester
Current Institution: University of Manchester
Date of Award: 2011
Availability of Full Text:
Access from EThOS:
Access from Institution:
This thesis investigates the anomalous underperformance of distressed stocks in the US computer and electronics industry. It shows that such anomaly can be explained by a parallel analysis of risk based rational pricing and profitability (earnings) levels to returns relationship propositions. For the 1990 to 2006 period, distressed stocks have on average underperformed their non-distressed counterparts. However, once the conditional relationship with profitability is taken into account, the distress risk is rewarded by a continuous positive return hence priced appropriately. In the computer and electronics industry growth stocks (low B/M) outperform on average value stocks (high B/M). The size factor has not been confirmed to be significant in explaining stock returns for this specific industry over the 1990 to 2006 period. The study also reveals that B/M and size factors do not proxy for distress risk. The B/M factor follows an inverted u-shape along the distress risk deciles axis. As result, stocks in low and high distress portfolios share similarly low B/M values. Cash flow based bankruptcy predictors estimated on a quarterly basis from a Cox proportional hazard model, that are used as proxy for a continuous distress risk factor in asset pricing tests, are able to predict bankruptcies at higher accuracy rates than the Z-Score as alternative measure.
Supervisor: Holscher, Jens Sponsor: Not available
Qualification Name: Thesis (D.B.A.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available
Keywords: Bankruptcy Prediction ; Distress Risk Pricing Anomaly ; Profitability ; Cash Flow ; Rational Pricing