To investigate the potential link between prediction accuracy
and realized default rates empirically, we create subsamples based
on spatial and industry segmentation. We ensure to have (1) a suf-
ficient number of segmentation units for the regression analysis,
(2) a sufficient number of firms per segmentation unit to calculate
meaningful accuracy ratios, and (3) a sufficient variation in realized default rates and default prediction accuracy across segmentation units. It is virtually impossible to conduct such analysis at the
individual firm-level because default events are rare events and
our sample period only spans 4 years.