Multivariate model for corporate bankruptcy prediction in Romania Cover Image

Multivariate model for corporate bankruptcy prediction in Romania
Multivariate model for corporate bankruptcy prediction in Romania

Author(s): Daniel BRINDESCU OLARIU
Subject(s): Business Economy / Management, Policy, planning, forecast and speculation, Transformation Period (1990 - 2010), Present Times (2010 - today), EU-Accession / EU-DEvelopment
Published by: Fundatia Română pentru Inteligenta Afacerii
Keywords: Discriminant analysis; Risk; Failure; Financial ratios; Classification accuracy; Benchmark;

Summary/Abstract: The current paper proposes a methodology for bankruptcy prediction applicable for Romanian companies. Low bankruptcy frequencies registered in the past have limited the importance of bankruptcy prediction in Romania. The changes in the economic environment brought by the economic crisis, as well as by the entrance in the European Union, make the availability of performing bankruptcy assessment tools more important than ever before. The proposed methodology is centred on a multivariate model, developed through discriminant analysis. Financial ratios are employed as explanatory variables within the model. The study has included 53,252 yearly financial statements from the period 2007 – 2010, with the state of the companies being monitored until the end of 2012. It thus employs the largest sample ever used in Romanian research in the field of bankruptcy prediction, not targeting high levels of accuracy over isolated samples, but reliability and ease of use over the entire population.

  • Issue Year: 4/2016
  • Issue No: 07
  • Page Range: 69-83
  • Page Count: 15
  • Language: English