Corporate Distress and Restructuring with Macroeconomic Fluctuations: The Cases of GM and Ford

Journal of Applied Finance, 2012

IFN Working Paper No. 780

37 Pages Posted: 11 Dec 2008 Last revised: 27 Jan 2013

See all articles by Lars Oxelheim

Lars Oxelheim

Research Institute of Industrial Economics (IFN); University of Agder; Knut Wicksell Center for Financial Studies, Lund University

Clas Wihlborg

Chapman University; University West

Multiple version iconThere are 3 versions of this paper

Date Written: August 29, 2011

Abstract

Traditional methods for evaluating corporate credit risk rarely consider the impact of the macro economy on corporate value and performance. We argue that lenders and management can obtain valuable information about the need for and approach to restructuring by decomposing default predictions into intrinsic and macroeconomic factors. We apply a method previously used for measuring macroeconomic exposures on default predictions in order to filter out macroeconomic factors. In this paper the method is applied on an analysis of the Z-scores for GM and Ford for the period 1996-2005. The macro-economy has affected the two firms in different ways with implications for managements and creditors approaches to restoring their financial health.

Keywords: credit risk, creditworthiness, Z-scores, default predictions, GM, Ford, restructuring

JEL Classification: G11, G32, G33, G34, L16, L62

Suggested Citation

Oxelheim, Lars and Wihlborg, Clas, Corporate Distress and Restructuring with Macroeconomic Fluctuations: The Cases of GM and Ford (August 29, 2011). Journal of Applied Finance, 2012, IFN Working Paper No. 780, Available at SSRN: https://ssrn.com/abstract=1313720 or http://dx.doi.org/10.2139/ssrn.1313720

Lars Oxelheim (Contact Author)

Research Institute of Industrial Economics (IFN) ( email )

P.O. Box 55665
SE-10215 Stockholm
Sweden
+46 8 665 4527 (Phone)
+46 8 665 4599 (Fax)

University of Agder ( email )

Serviceboks 422
N-4604 Kristiansand, VEST AGDER 4604
Norway

Knut Wicksell Center for Financial Studies, Lund University ( email )

P.O.Box 7080
S-220 07 Lund
Sweden
+46462228744 (Phone)

Clas Wihlborg

Chapman University ( email )

333 N. Glassell
Orange, CA 92866
United States
+17147447630 (Phone)

University West ( email )

Trollhättan, 46186
Sweden

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
284
Abstract Views
2,041
rank
110,076
PlumX Metrics