The Success Modeling Project: GDP and Prime Rate are now part of the BRD

Economic circumstances — and changes in those circumstances — almost certainly affect both the likelihood of bankruptcy and its probability of success. But most statistical modeling of bankruptcy success ignores economic circumstances. The reason is that the data are difficult to assemble.

Beginning with the January edition, the BRD will include data for two important economic indicators: Gross Domestic Product and the Prime Rate of Interest. For each case, we measured GDP and Prime Rate at seven different times: (1) at filing, (2) one year before filing, (3) two years before filing, (4) at case disposition (confirmation, dismissal or conversion), (5) one year after case disposition, (6) two years after case disposition, and (7) refiling. GDP is for the quarter; the Prime Rate is for the specific date.

The GDP data are drawn from the Bureau of Economic Analysis of the United States Department of Commerce, Table 1.1.3. Real Gross Domestic Product, Quantity Indexes. From these amounts, users can calculate a wide variety of GDP variables. They include the ratio of GDP at case disposition to GDP at case filing (a measure of change in GDP during the bankruptcy case) or the ratio of GDP one year before filing to GDP two years before filing (a measure of change in GDP in the second year prior to filing). The latter might, for example, be used to look for a lagged effect of GDP change on the reorganization process.

The Prime Rate data are drawn from the Wall Street Journal Prime Rate History. The graph of the BRD Prime Rate data can be downloaded from our Trend Tracking page. Researchers can use the Prime Rate data in the form we supply them, or use them in combination to calculate a wide variety of variables. For example, either the ratio of Prime Rate at case disposition to Prime Rate at case filing or the difference between the Prime Rate at case disposition and the Prime Rate at case filing might be a useful measure of the change in interest rates while the case was pending.

As the BRD Success Modeling Project approaches the end of its first year on January 31, 2012, we are adding new fields rapidly. To see what we've got, download the Protocols. You can find the new GDP and Prime Rate fields easily because all the field names begin with "Gdp" or "Prime."

Find out more about the Bankruptcy Success-modeling Project

The BRD is user-supported. We need your help to continue providing our services. Please contribute.

The BRD has been supported by grants from these organizations:

National Conference of Bankruptcy Judges

Turnaround Management Association

American Bankruptcy Institute

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