Modelling corporate vulnerability: Yet another empirical attempt

This paper argues that potential weaknesses of MDA could be avoided by using the Mahalanobis Distance (d²). The model’s uniqueness allows for a more detailed analysis of corporate failure triggers (conversely shock absorbers) at the corporate level. Incidentally, the main input for the distance analysis, the sample’s dispersion matrix, could be used to quantify the distance’s sensitivity to changes in the (co)variances of so-called policy variables. Such analysis is likely to benefit central bank regulators (monetary & fiscal policy) as well as corporate management (interest rate sensitivity).