The Usefulness of Accounting Information, Economic Variables and Corporate Governance Measures in Predicting Corporate Failure – An Empirical Study

Abstract

The trend of corporate fa-il•ures around the world has been described as financial crises that extended to threaten the stability of world fmancial markets (Glick, 2002; Aziz and Dar, 2004). For that reason, timely identification of corporate failure and default probabilities seems imperative. In view of the importance of providing early warning signals to predict corporate failure, the present research has been motivated by the need to predict corporate failure, taking into account the specifics of the Egyptian market. The present study aims at achieving the following main objective; investigating the usefulness of employing accounting information, macroeconomic variables and corporate governance measures to predict corporate failure in an Egyptian setting. The present research has been organized in three chapters. Chapter one sheds light on the importance of predicting corporate failure through highlighting the extended effect of corporate failure at various levels. It identifies causes underlying corporate failure, failure indicators, operational meaning, and reviews literature of corporate failure prediction.