CHALLENGES OF CORPORATE DEFAULT VALUATION

This paper aims at identifying and analyzing corporate default predictors. The most recent theories concerning the default boundaries are analyzed from a comparative perspective. Incapacity of meeting the financial obligations or sudden lowering of assets value are appreciated as being the main corporate default causes. Nevertheless, there are firms which default despite a convenient liquidity ratio or a positive value of the Tangible Net Worth. Moreover, other firms manage to avoid default although liquidity and profitability indicators are considered to be alarming. This is why the idea of adapting the default analysis to the particular financial features of every company becomes more and more valuable. The case study contains an analysis of a sample of US firms extracted from the Customer Research Data of Moody's in terms of default predictors. Conclusions tend to subscribe to the aforementioned idea of particular default corporate analysis, but there is also enough open space to integrate opposite ideas.