For the most part, research purporting to address the issue of financial distress has actually st... more For the most part, research purporting to address the issue of financial distress has actually studied samples of bankrupt companies. Financial distress and bankruptcy are different. In contrast, this paper starts with a sample of companies that are financially distressed but not yet bankrupt. The sample was obtained by screening the Compustat industry database with a three-tiered identification system. The screen bifurcated companies into financially and non-financially distressed groups. A multi-tiered screen reduces the incidence of mistakenly identifying a non-distressed company as financially distressed. The paper then compares factors indicating the likelihood of future bankruptcies to those indicating future financial distress. To do this, an early warning financial-distress model was developed and compared to a methodologically similar existent model of bankruptcy. The final financial distress model included only one variable present in the bankruptcy model and four new vari...
Evidence that option trading can influence the prices of the underlying common stocks is discusse... more Evidence that option trading can influence the prices of the underlying common stocks is discussed. This research was conducted in the time frame 1981-1982 and that was before there were many articles about deviations from efficient-market pricing. Stock prices were believed to fluctuate without influence from trading of listed options on U.S. common stocks
This paper recounts the history of early warning failure models and then adds to that literature ... more This paper recounts the history of early warning failure models and then adds to that literature by evaluating the proposition that all suppliers can be treated similarly when evaluating failure tendencies. The work is performed for the automobile supplier industry because that industry has a long and complex supply chain structure and because we have a history of working with major automotive OEMs to protect their supply chain. The project benefited from the support and cooperation of BBK Ltd. the largest turnaround firm worldwide engaged by the automobile sector. In contrast to previous work which utilized a single predictive model to indicate the likelihood that a supplier company was in distress, our effort tested the idea that large and small automobile suppliers face different exigencies and therefore require separate predictive models. The paper concludes by identifying the key factors to consider when reviewing the health of automobile suppliers.
For the most part, research purporting to address the issue of financial distress has actually st... more For the most part, research purporting to address the issue of financial distress has actually studied samples of bankrupt companies. Financial distress and bankruptcy are different. In contrast, this paper starts with a sample of companies that are financially distressed but not yet bankrupt. The sample was obtained by screening the Compustat industry database with a three-tiered identification system. The screen bifurcated companies into financially and non-financially distressed groups. A multi-tiered screen reduces the incidence of mistakenly identifying a non-distressed company as financially distressed. The paper then compares factors indicating the likelihood of future bankruptcies to those indicating future financial distress. To do this, an early warning financial-distress model was developed and compared to a methodologically similar existent model of bankruptcy. The final financial distress model included only one variable present in the bankruptcy model and four new vari...
Early warning models are among the most utilized developments in finance. A good early warning mo... more Early warning models are among the most utilized developments in finance. A good early warning model can predict with a high degree of accuracy the likelihood that a healthy company will either go bankrupt or become financially distressed. B2B companies supply products are now global. This paper extends the research comparing indicators of financial health to the subject of how industrial globalization affects early warning models. In specific, it considers model develop across two continents: North America and East Asia. The target of the research are global auto suppliers, those companies deliver parts and equipment to original equipment auto manufacturers. The findings are particularly important because of the collapse and resurrection of US OEMs. The modeling effort tested the ability of a single global model of financial distress to capture the determinants of auto supplier health on two continents. Individual models for each continent proved to be superior to a single model.
The labor studies literature has for many years accepted the labor hoarding theory. That theory d... more The labor studies literature has for many years accepted the labor hoarding theory. That theory derives from seminal work by Oi (1962), Solow (1964), Miller (1971), and Fair (1985). Those studies argue that as a result of the absolute cost of hiring and training certain workers that even when the economy turns down, firms avoid layoffs as would be expected
Globalization has precipitated movement of output and employment between regions. How similar are... more Globalization has precipitated movement of output and employment between regions. How similar are companies in different regions following this dramatic shift in economic activity?
ABSTRACT The paper examines whether it is better to separate a model/sample to account for differ... more ABSTRACT The paper examines whether it is better to separate a model/sample to account for differences between large and small firms when developing a predictive tool to identify which companies are likely to become distressed, and therefore at risk to the supply chain. Previous research has scaled data by size of company but has not considered whether the process leading to financial distress may be different depending on firm size.
Financial distress precedes bankruptcy. Most financial distress models actually rely on bankruptc... more Financial distress precedes bankruptcy. Most financial distress models actually rely on bankruptcy data, which is easier to obtain. We obtained a dataset of financially distressed but not yet bankrupt companies supplying a major auto manufacturer. An early warning model successfully discriminated between these distressed companies and a second group of similar but healthy companies. Previous researchers argue the matched-sample design, on which some earlier models were built, causes bias. To test for bias, the dataset was partitioned into smaller samples that approach equal groupings. We statistically confirm the presence of a bias and describe its impact on estimated classification rates.
Sustainable growth rate defines the rate at which a company's sales and assets can grow if t... more Sustainable growth rate defines the rate at which a company's sales and assets can grow if the company sells no new equity and wishes to maintain its capital structure. The traditional formula assumes that the firm can increase its indebtedness. Many private firms and most firms in ...
The effects of economic conditions, business costs, and new business formations on business failu... more The effects of economic conditions, business costs, and new business formations on business failures were estimated for the time period 19691982. A cross-sectionally correlated and temporally autoregressive model was used to estimate model parameters. Significant differences ...
ogy has also demonstrated useful advantages in other financial applications, including futures tr... more ogy has also demonstrated useful advantages in other financial applications, including futures trading volumes prediction in bankruptcy prediction, are limited to back-propagation neural networks. Their well-known disadvantages, however, limit the practical usefulness , stocks selection (Kryzanowski, Galler, and Wright, 1993), forecasting exchange rates (Kuan of neural discriminant models. Instead, a probabilistic neural network with fewer of these difficulties is proposed. Using data from the U.S. and Liu, 1995), and real estate valuation (Worzala, Lenk, and Silva, 1995).
This paper examines how the composition and characteristics of corporate boards relates to firms'... more This paper examines how the composition and characteristics of corporate boards relates to firms' success and solvency; the study here focuses on the question of insolvency. This study finds that both board composition and member characteristics relate to whether or not firms can avoid bankruptcy. Boards have a major role to play in whether or not the company can remain solvent. A more versus less independent board, one which is larger and comprised of older members, has more members currently serving as CEOs of other companies, and whose independent/outside directors own less stock is best positioned to help a firm remain out of bankruptcy. Firms may use the results to custom tailor boards as older members retire and new members are inducted.
Journal of Business Finance <html_ent glyph="@amp;" ascii="&"/> Accounting, 2002
... Process Harlan D. Platt and Marjorie B. Platt* 1. INTRODUCTION ... Critics argue that bankrup... more ... Process Harlan D. Platt and Marjorie B. Platt* 1. INTRODUCTION ... Critics argue that bankruptcy cases end with the emergence of relatively unhealthy companies, distribute funds to junior creditors at the expense of more senior creditors, and linger excessively in court. ...
For the most part, research purporting to address the issue of financial distress has actually st... more For the most part, research purporting to address the issue of financial distress has actually studied samples of bankrupt companies. Financial distress and bankruptcy are different. In contrast, this paper starts with a sample of companies that are financially distressed but not yet bankrupt. The sample was obtained by screening the Compustat industry database with a three-tiered identification system. The screen bifurcated companies into financially and non-financially distressed groups. A multi-tiered screen reduces the incidence of mistakenly identifying a non-distressed company as financially distressed. The paper then compares factors indicating the likelihood of future bankruptcies to those indicating future financial distress. To do this, an early warning financial-distress model was developed and compared to a methodologically similar existent model of bankruptcy. The final financial distress model included only one variable present in the bankruptcy model and four new vari...
Evidence that option trading can influence the prices of the underlying common stocks is discusse... more Evidence that option trading can influence the prices of the underlying common stocks is discussed. This research was conducted in the time frame 1981-1982 and that was before there were many articles about deviations from efficient-market pricing. Stock prices were believed to fluctuate without influence from trading of listed options on U.S. common stocks
This paper recounts the history of early warning failure models and then adds to that literature ... more This paper recounts the history of early warning failure models and then adds to that literature by evaluating the proposition that all suppliers can be treated similarly when evaluating failure tendencies. The work is performed for the automobile supplier industry because that industry has a long and complex supply chain structure and because we have a history of working with major automotive OEMs to protect their supply chain. The project benefited from the support and cooperation of BBK Ltd. the largest turnaround firm worldwide engaged by the automobile sector. In contrast to previous work which utilized a single predictive model to indicate the likelihood that a supplier company was in distress, our effort tested the idea that large and small automobile suppliers face different exigencies and therefore require separate predictive models. The paper concludes by identifying the key factors to consider when reviewing the health of automobile suppliers.
For the most part, research purporting to address the issue of financial distress has actually st... more For the most part, research purporting to address the issue of financial distress has actually studied samples of bankrupt companies. Financial distress and bankruptcy are different. In contrast, this paper starts with a sample of companies that are financially distressed but not yet bankrupt. The sample was obtained by screening the Compustat industry database with a three-tiered identification system. The screen bifurcated companies into financially and non-financially distressed groups. A multi-tiered screen reduces the incidence of mistakenly identifying a non-distressed company as financially distressed. The paper then compares factors indicating the likelihood of future bankruptcies to those indicating future financial distress. To do this, an early warning financial-distress model was developed and compared to a methodologically similar existent model of bankruptcy. The final financial distress model included only one variable present in the bankruptcy model and four new vari...
Early warning models are among the most utilized developments in finance. A good early warning mo... more Early warning models are among the most utilized developments in finance. A good early warning model can predict with a high degree of accuracy the likelihood that a healthy company will either go bankrupt or become financially distressed. B2B companies supply products are now global. This paper extends the research comparing indicators of financial health to the subject of how industrial globalization affects early warning models. In specific, it considers model develop across two continents: North America and East Asia. The target of the research are global auto suppliers, those companies deliver parts and equipment to original equipment auto manufacturers. The findings are particularly important because of the collapse and resurrection of US OEMs. The modeling effort tested the ability of a single global model of financial distress to capture the determinants of auto supplier health on two continents. Individual models for each continent proved to be superior to a single model.
The labor studies literature has for many years accepted the labor hoarding theory. That theory d... more The labor studies literature has for many years accepted the labor hoarding theory. That theory derives from seminal work by Oi (1962), Solow (1964), Miller (1971), and Fair (1985). Those studies argue that as a result of the absolute cost of hiring and training certain workers that even when the economy turns down, firms avoid layoffs as would be expected
Globalization has precipitated movement of output and employment between regions. How similar are... more Globalization has precipitated movement of output and employment between regions. How similar are companies in different regions following this dramatic shift in economic activity?
ABSTRACT The paper examines whether it is better to separate a model/sample to account for differ... more ABSTRACT The paper examines whether it is better to separate a model/sample to account for differences between large and small firms when developing a predictive tool to identify which companies are likely to become distressed, and therefore at risk to the supply chain. Previous research has scaled data by size of company but has not considered whether the process leading to financial distress may be different depending on firm size.
Financial distress precedes bankruptcy. Most financial distress models actually rely on bankruptc... more Financial distress precedes bankruptcy. Most financial distress models actually rely on bankruptcy data, which is easier to obtain. We obtained a dataset of financially distressed but not yet bankrupt companies supplying a major auto manufacturer. An early warning model successfully discriminated between these distressed companies and a second group of similar but healthy companies. Previous researchers argue the matched-sample design, on which some earlier models were built, causes bias. To test for bias, the dataset was partitioned into smaller samples that approach equal groupings. We statistically confirm the presence of a bias and describe its impact on estimated classification rates.
Sustainable growth rate defines the rate at which a company's sales and assets can grow if t... more Sustainable growth rate defines the rate at which a company's sales and assets can grow if the company sells no new equity and wishes to maintain its capital structure. The traditional formula assumes that the firm can increase its indebtedness. Many private firms and most firms in ...
The effects of economic conditions, business costs, and new business formations on business failu... more The effects of economic conditions, business costs, and new business formations on business failures were estimated for the time period 19691982. A cross-sectionally correlated and temporally autoregressive model was used to estimate model parameters. Significant differences ...
ogy has also demonstrated useful advantages in other financial applications, including futures tr... more ogy has also demonstrated useful advantages in other financial applications, including futures trading volumes prediction in bankruptcy prediction, are limited to back-propagation neural networks. Their well-known disadvantages, however, limit the practical usefulness , stocks selection (Kryzanowski, Galler, and Wright, 1993), forecasting exchange rates (Kuan of neural discriminant models. Instead, a probabilistic neural network with fewer of these difficulties is proposed. Using data from the U.S. and Liu, 1995), and real estate valuation (Worzala, Lenk, and Silva, 1995).
This paper examines how the composition and characteristics of corporate boards relates to firms'... more This paper examines how the composition and characteristics of corporate boards relates to firms' success and solvency; the study here focuses on the question of insolvency. This study finds that both board composition and member characteristics relate to whether or not firms can avoid bankruptcy. Boards have a major role to play in whether or not the company can remain solvent. A more versus less independent board, one which is larger and comprised of older members, has more members currently serving as CEOs of other companies, and whose independent/outside directors own less stock is best positioned to help a firm remain out of bankruptcy. Firms may use the results to custom tailor boards as older members retire and new members are inducted.
Journal of Business Finance <html_ent glyph="@amp;" ascii="&"/> Accounting, 2002
... Process Harlan D. Platt and Marjorie B. Platt* 1. INTRODUCTION ... Critics argue that bankrup... more ... Process Harlan D. Platt and Marjorie B. Platt* 1. INTRODUCTION ... Critics argue that bankruptcy cases end with the emergence of relatively unhealthy companies, distribute funds to junior creditors at the expense of more senior creditors, and linger excessively in court. ...
Uploads
Papers by Harlan Platt