Ugur, Mehmet ORCID: https://orcid.org/0000-0003-3891-3641 and Zeynalov, Ayaz (2026) Modeling recurrent financial distress: a survival analysis of structured dependence. Research in International Business and Finance (RIBAF):103635. ISSN 0275-5319 (Print), 1878-3384 (Online) (doi:10.1016/j.ribaf.2026.103635)

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Abstract

Existing research either overlooks dependence between recurrent financial distress events or model it as shared frailty. We argue in favor of modeling different dependence structures explicitly and verifying the specification that provides better predictive power. Drawing on an agency-theoretic model and a panel dataset for 25,660 listed firms observed from 1993-2022, we report three findings: (i) recurrent distress events exhibit path dependence; (ii) frailty models capturing unobserved structural dependence provide the best model fit and predictive performance, achieving a Harrell’s C of 0.92 in the baseline specification and 0.93 in the extended model, representing improvements of 4-15 % points over competing specifications, when estimating both distress hazards and recovery probabilities; and (iii) parsimonious hazard specifications grounded in agency theory outperform models based on ad hoc selection of financial distress predictors. Our findings imply that the predictive power of recurrent financial distress models can be improved by testing for different types of dependence between recurrent events and drawing on agency theory of managerial effort for selecting the potential determinants of financial distress.

Item Type:	Article
Uncontrolled Keywords:	financial distress, recurrent event, survival analysis, leverage, competition
Subjects:	H Social Sciences > H Social Sciences (General) H Social Sciences > HD Industries. Land use. Labor > HD61 Risk Management Q Science > QA Mathematics
Faculty / School / Research Centre / Research Group:	Greenwich Business School Greenwich Business School > Political Economy, Governance, Finance and Accountability (PEGFA) Journal of Economic Literature Classification > Political Economy, Governance, Finance and Accountability (PEGFA) Greenwich Business School > School of Accounting, Finance and Economics
Last Modified:	28 Sep 2026 10:38
URI:	https://gala.gre.ac.uk/id/eprint/54512

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