AN EMPIRICAL RESEARCH ON EARLY BANKRUPTCY FORECASTING MODELS: DOES LOGIT ANALYSIS ENHANCE BUSINESS FAILURE PREDICTABILITY?
University of Piraeus, Greece
Hellenic Open University, Greece
National Bank of Greece
The forecast of bankruptcy is of grate value to investors, creditors, lenders and anyone who relies upon the company viability. As a consequence, numerous studies have tried to develop models enhancing early bankruptcy forecasting. To this end, Logit is the most frequently employed methodology, because it has been proved very effective. Within the framework of the present study, it was attempted to construct Logit models, which enable early identification of Greek non-viable companies. The results can be characterized, on average, as satisfactory, given that healthy companies are correctly classified up to 95% of the companies in the sample. However, the classification error of the bankrupt ones is high, ranging from 30% to 60%, thus limiting the modelsí practical applicability.
Keywords: Logit Analysis, bankruptcy forecasting, corporate failure, financial ratios
JEL Classification Code: G17, G33, C13, C51, C53