Welcome to BankruptcyProbability.com
This site provides estimates of the probability of
bankruptcy for a broad sample of US public firms. As
discussed in the Data Library section, the estimates
are available on both a calendar quarter and fiscal
quarter basis for almost all firms on the NYSE, AMEX,
and NASDAQ stock exchanges between 1965 and 2005.
The estimates are based on the Black-Scholes-Merton
option pricing model. The basic idea behind the bankruptcy
probability estimates is to extract public information
about the probability of bankruptcy that is contained
in stock market prices. The procedure to extract this
information was developed in an article by Hillegeist,
Cram, and Lundstedt that was published in the Review
of Accounting Studies in 2004. This paper describes
in detail the reasoning behind using stock prices, as
opposed to accounting data, to extract the probability
estimates as well as the methodological steps and assumptions
behind the estimates.
In addition to the estimates using the methodology
in the RAST article, this site also provides several
alternative measures of the probability of bankruptcy
based on differing sets of input assumptions. Depending
on how you wish to use the estimates, you may wish to
use one of these alternatives.
There is no charge to download
and use these bankruptcy probability estimates. However,
we require that you cite the Hillegeist et al (2004)
RAST paper mentioned above in any written or published
material that makes use of the estimates.