In this research, we assessed the extent to which stock market information can beused to predict leading indicators of the bank financial distress.Likewise, we specified and tested a logit early warning model of bank financialdistress, designed for Iranian banks, which
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In this research, we assessed the extent to which stock market information can beused to predict leading indicators of the bank financial distress.Likewise, we specified and tested a logit early warning model of bank financialdistress, designed for Iranian banks, which tests if market-based indicators addpredictive value to models relying on accounting data obtained from stock market.On the other hand, we studied the robustness of the link between marketinformation and financial downgrading of a bank in the light of the safely net andasymmetric information hypotheses. In the end, we concluded that some of the resultsof accomplished studies, support the use of market-related indicators in order topredict the financial distress.Other results, however, show that the accuracy of the predictive power of thefinancial distress depends on the extent to which bank liabilities are market traded. Itmeans that if the bank undertakes to offer accurate data to the market, then a muchbetter prediction can be made based on the bank data.
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