TITLE
"An Empirical Examination of Sample Selection Methods in the Context of Life Insurer Financial Distress," Journal of Insurance Issues, James M. Carson and Robert E. Hoyt, Fall 2003, Vol. 26, No. 2, pp. 114-128. Entire article in Acrobat format.

ABSTRACT
This study empirically examines properties of matched-pair versus nonmatched-
pair sampling methods in the context of financial distress for the U.S. life
insurance industry. While the majority of prior insurer insolvency studies employed
matched-pair sampling techniques to identify important variables and to classify and
predict firms likely to become financially distressed, we provide empirical evidence
that three solvency-related items are sample dependent: variables identified as important
measures of insolvency, coefficients, and classification rates. Thus, empirical
studies employing relatively small matched-pair samples are likely to yield samplespecific
results that are not fully generalizable to the relevant population of firms.
Results apply directly to financial distress models and also extend to other research
employing choice-based sampling methods that involve binary state models with
skewed distribution of the two states of interest.

[Keywords: financial distress; choice-based sample; classification; bias]