Do auditors' opinions, industry factors and macroeco(14)

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of all listing firms, which indicates the importance of electronic industry in Taiwan. We further observe that, from 1987 to 2005, the earnings fluctuation of electronic stocks is greater than that of the overall publicly listed companies, as reflected by the higher standard variations of gross profits, operating incomes, pre-tax incomes, and earnings per share of electronic stocks. Because of its higher earnings risk (fluctuations) and the associated higher default risk, Taiwan electronic industry has lower loan ratios than the market average. As shown in Table 1-2, the ratio of long term debts to total assets and the ratio of total debts (both long term and short term) to total assets of Taiwan electronic companies are respectively 0.065976 (compared to 0.089073 for all public firms) and 0.200685 (compared to 0.271736 for all public firms). Having the lower debt ratio, electronic companies’ financial conditions are expected to be less sensitive to interest fluctuations. To test this expectation, we include the interaction term of an industry dummy variable for electronic industry (ELEi 1if firm i belongs to electronic industry, 0 otherwise) and one-year depositary interest rate change ratio. We expect a negative coefficient for this interaction term. 3.3 Prediction Accuracy 3.3.1.Type I and Type II errors

To predict bankruptcy status for the test period, we employ the coefficients estimated using the training period sample under the maximum likelihood functions.

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