FAQ

BRAINKRUPTCY is an independent information provider. Based on artificial intelligence methodology BRAINKRUPTCY estimates the measure of bankruptcy risk for listed US companies and provides bankruptcy risk information.

Corporate bankruptcy is a major company event which has large implications for shareholders, creditors, and other stakeholders. It is vital to predict an imminent bankruptcy at an early stage, rather than be unexpectedly impacted by the consequences when a company files for bankruptcy. Precise information on the bankruptcy risk helps evaluate the risk of an individual stock position or an entire portfolio. By using BRAINKRUPTCY, financially distressed companies are detected at the earliest possible stage. That group includes companies that are at imminent risk of filing for bankruptcy. As a result, shareholders, creditors, and other stakeholders can take action before the bankruptcy event actually occurs.

BRAINKRUPTCY estimates the measure of bankruptcy risk and provides bankruptcy risk information on listed US companies.

BRAINKRUPTCY empirically estimates the measure of bankruptcy risk of listed US companies and accurately distinguishes between companies that are financially healthy, and companies that exhibit severe financial distress. The latter group of financially distressed companies specifically includes listed US companies which are at imminent risk of filing for bankruptcy within the next 12 months. BRAINKRUPTCY helps detect corporate bankruptcies at the earliest possible stage. BRAINKRUPTCY offers different services on a monthly subscription basis which provide weekly updated bankruptcy risk information on listed US companies. The user can cancel a subscription any time. The minimum period of commitment is one month.

BRAINKRUPTCY provides detailed bankruptcy risk information on listed US companies. The services of BRAINKRUPTCY and the associated monthly subscriptions are for individual or commercial use. While monthly subscriptions for individual use are focused on advanced retail investors, the monthly subscription for commercial use is focused on asset management firms, hedge funds, professional equity researchers, as well as shareholders, creditors and other stakeholders.

According to the “efficient market hypothesis,” stock prices should fully reflect all available information on a company’s financial status at any point in time. The risk of a company going bankrupt in the future should also be reflected in its stock price. However, markets are not as efficient as they should be about making price adjustments on the basis of a company's financial distress. Bankruptcy risk estimation is extremely valuable because it protects investors from the negative financial impact of financially distressed companies and bankruptcies.

BRAINKRUPTCY applies artificial intelligence methodology to estimate a company’s level of financial distress. The applied bankruptcy risk model empirically estimates the measure of bankruptcy risk for listed US companies. BRAINKRUPTCY applies the measure of bankruptcy risk in conjunction with the cut-off-rate to distinguish between companies that are financially healthy, and companies that exhibit severe financial distress. The latter group of financially distressed companies specifically includes listed US companies which are at imminent risk of filing for bankruptcy within the next 12 months. The empirical results are derived from a two-step procedure: (1) Estimation of the bankruptcy risk model: The bankruptcy risk model is estimated at the beginning of each year by applying the historical data of the last 10 years for US listed companies. Historical data includes accounting information and market data, along with further company information such as shareholder structure, and macroeconomic data. (2) Estimation of a company’s measure of bankruptcy risk: The most recent information is applied to the bankruptcy risk model to estimate the measure of bankruptcy risk, and includes company-specific accounting information and market data, company information such as shareholder structure, and macroeconomic data. If the estimated measure of bankruptcy risk exceeds a specific threshold value, the company is classified as a financially distressed company which is at imminent risk of filing for bankruptcy.

The applied bankruptcy risk model is updated at the beginning of each year and it is applied for the first time at the beginning of the second quarter. Changes in the estimated measures of bankruptcy risk are updated weekly, by including periodically disclosed information: (1) Accounting data is disclosed quarterly in 10-Q filings; (2) Shareholder structure information is disclosed quarterly in 13F filings; (3) Macroeconomic data is released in a weekly or monthly cycle For example, if a specific company files a 10-Q filing which provides new accounting information, the measure of bankruptcy risk for that specific company is updated to incorporate that most recent filing. The applied bankruptcy risk model also incorporates daily market data on a company’s stock price and market value. For the first trading day of each week, BRAINKRUPTCY provides updates to estimate the measures of bankruptcy risk for all listed US companies.