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Scientific paper - Original scientific paper
Bankruptcy risk model and empirical tests
Proceedings of the National Academy of Sciences of the United States of America, 107 (2010), 43; 18325-18330. https://doi.org/10.1073/pnas.1011942107
Podobnik, Boris; Horvatić, Davor; Petersen, Alexander M.; Urošević, Branko; Stanley, H. Eugene

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Podobnik, B., Horvatić, D., Petersen, A. M., Urošević, B. & Stanley, H. E. (2010). Bankruptcy risk model and empirical tests. Proceedings of the National Academy of Sciences of the United States of America, 107. (43), 18325-18330. doi: 10.1073/pnas.1011942107

Podobnik, Boris, et al. "Bankruptcy risk model and empirical tests." Proceedings of the National Academy of Sciences of the United States of America, vol. 107, no. 43, 2010, pp. 18325-18330. https://doi.org/10.1073/pnas.1011942107

Podobnik, Boris, Davor Horvatić, Alexander M. Petersen, Branko Urošević and H. Eugene Stanley. "Bankruptcy risk model and empirical tests." Proceedings of the National Academy of Sciences of the United States of America 107, no. 43 (2010): 18325-18330. https://doi.org/10.1073/pnas.1011942107

Podobnik, B., et al. (2010) 'Bankruptcy risk model and empirical tests', Proceedings of the National Academy of Sciences of the United States of America, 107(43), pp. 18325-18330. doi: 10.1073/pnas.1011942107

Podobnik B, Horvatić D, Petersen AM, Urošević B, Stanley HE. Bankruptcy risk model and empirical tests. Proceedings of the National Academy of Sciences of the United States of America [Internet]. 2010 [cited 2025 March 24];107(43):18325-18330. doi: 10.1073/pnas.1011942107

B. Podobnik, D. Horvatić, A. M. Petersen, B. Urošević and H. E. Stanley, "Bankruptcy risk model and empirical tests", Proceedings of the National Academy of Sciences of the United States of America, vol. 107, no. 43, pp. 18325-18330, 2010. [Online]. Available at: https://urn.nsk.hr/urn:nbn:hr:217:744656. [Accessed: 24 March 2025]

Metadata
Title (english)Bankruptcy risk model and empirical tests
AuthorBoris Podobnik
AuthorDavor Horvatić
AuthorAlexander M. Petersen
AuthorBranko Urošević
AuthorH. Eugene Stanley
Author's institutionUniversity of Zagreb
Faculty of Science
(Department of Physics)
Scientific / art field,
discipline and subdiscipline		NATURAL SCIENCES
Physics
Abstract (english)
We analyze the size dependence and temporal stability of firm bankruptcy risk in the US economy by applying Zipf scaling techniques. We focus on a single risk factor—the debt-to-asset ratio R—in order to study the stability of the Zipf distribution of R over time. We find that the Zipf exponent increases during market crashes, implying that firms go bankrupt with larger values of R. Based on the Zipf analysis, we employ Bayes’s theorem and relate the conditional probability that a bankrupt firm... More has a ratio R with the conditional probability of bankruptcy for a firm with a given R value. For 2, 737 bankrupt firms, we demonstrate size dependence in assets change during the bankruptcy proceedings. Prepetition firm assets and petition firm assets follow Zipf distributions but with different exponents, meaning that firms with smaller assets adjust their assets more than firms with larger assets during the bankruptcy process. We compare bankrupt firms with nonbankrupt firms by analyzing the assets and liabilities of two large subsets of the US economy: 2, 545 Nasdaq members and 1, 680 New York Stock Exchange (NYSE) members. We find that both assets and liabilities follow a Pareto distribution. The finding is not a trivial consequence of the Zipf scaling relationship of firm size quantified by employees—although the market capitalization of Nasdaq stocks follows a Pareto distribution, the same distribution does not describe NYSE stocks. We propose a coupled Simon model that simultaneously evolves both assets and debt with the possibility of bankruptcy, and we also consider the possibility of firm mergers. Less
Keywords (english)
Languageenglish
Publication typeScientific paper - Original scientific paper
Publication statusPublished
Peer reviewPeer review - international
Publication versionPublished version
Journal titleProceedings of the National Academy of Sciences of the United States of America
Numberingvol. 107, no. 43, pp. 18325-18330
p-ISSN0027-8424
DOIhttps://doi.org/10.1073/pnas.1011942107
URN:NBNurn:nbn:hr:217:744656
Publication2010
Document URLhttp://dx.doi.org/10.1073/pnas.1011942107
Type of resourceText
Access conditionsOpen access
Terms of useLicence In copyright icon
Public note© 2010 National Academy of Sciences. Freely available online through the PNAS open access option. Contributed by H. Eugene Stanley, August 18, 2010 (sent for review May 6, 2010). Published online before print on October 11, 2010. Published October 26, 2010.
Created on2019-11-03 16:52:25
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