Reassessment of Corporate Bankruptcy Prediction Models Efficiency : Evidence from Serbia
Reassessment of Corporate Bankruptcy Prediction Models Efficiency : Evidence from Serbia

Summary/Abstract: Having in mind various negative influences that corporate bankruptcy has on the economy of the Republic of Serbia, corporate bankruptcy prediction is of extreme importance. Therefore, the basic motive for writing this paper was an attempt to assess the possibility of forecasting bankruptcy of business entities which operate on the Republic of Serbia's market. We have calculated the already formed M-score, formed based on the data from the financial statements of Serbian business entities. As a comparison models, we have calculated the two most acknowledged Z-score models. The randomly chosen sample consisted of 35 entities in bankruptcy and the same number of non-bankrupt entities. The goal of the research was to reassess the relevance of the tested models for a longer period, as well as their precision in the corporate bankruptcy prediction in an unstable economic environment of the Republic of Serbia. According to the results, the conclusion is that the tested M-score proved its precision in bankruptcy prediction in Serbia, and its use is, therefore, recommended. On the other hand, the Altman’s Z-score models do not have statistical relevance and hence we recommend that their use for bankruptcy prediction in the Republic of Serbia should be with caution.

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