Title

Best's Ratings, Financial Ratios and Prior Probabilities in Insolvency Prediction

Authors

Jan Ambrose, La Salle UniversityFollow
J. Allen Seward, University of Pennsylvania

Document Type

Article

Publication Date

6-1988

Abstract

Denenberg [7] hypothesized that Best's financial ratings provided an accurate estimate of those insurers that would not become insolvent. Several researchers, most notably Pinches and Trieschmann, sought to quantify those predictions through the use of multivariate discriminant analysis. The authors of this paper incorporate Best's ratings into the discriminant analysis through a system of dummy variates. Best's ratings are then compared to the results obtained by the use of financial variables. Finally, a two-stage discriminant technique is introduced and its results are shown to be better for predicting insolvency for property-liability firms.

Language

English

Comments

This article is the authors' final published version in Journal of Risk and Insurance, Volume 55, Issue 2, June 1988, Pages 229-244.

The published version is available at https://doi.org/10.2307/253325. Copyright © American Risk and Insurance Association

Recommended Citation

Ambrose, Jan and Seward, J. Allen, "Best's Ratings, Financial Ratios and Prior Probabilities in Insolvency Prediction" (1988). Department of Finance. 15.
https://digitalcommons.lasalle.edu/finance/15

DOI

https://doi.org/10.2307/253325