The stability of bankruptcy predictors in the construction and manufacturing industries at various times before bankruptcy
Loading...
Date
2017-06-29
Authors
ORCID
Advisor
Referee
Mark
Journal Title
Journal ISSN
Volume Title
Publisher
Technická univerzita v Liberci
Altmetrics
Abstract
This article focuses on the design of bankruptcy models, specifi cally the selection of suitable
predictors. Previous research has drawn mainly on data concerning manufacturing companies
one year before bankruptcy. Our research examines fi nancial ratios that are suitable bankruptcy
indicators in two different industries (the construction and manufacturing industries) over a period
of fi ve years prior to bankruptcy. Our main objective is to verify whether bankruptcy predictors
are industry-specifi c. Another objective was to determine which indicators can detect signs of
bankruptcy earlier than one period before bankruptcy. We presume that the application of industryspecifi
c indicators can help increase the predictive accuracy of bankruptcy models when applied to
a particular industry. Per analogiam, we assume that the inclusion of indicators capable of detecting
signs of bankruptcy more than a year before its occurrence will increase their predictive capacity.
Signifi cant predictors were fi rst identifi ed on a linear basis using the parametric t-test or F-test; for
the sake of comparison, a non-linear non-parametric Boosted Trees method was also applied. Data
for a total of 34,229 active companies and 304 companies that went bankrupt during the relevant
period was analyzed. The research confi rmed our presumption that bankruptcy predictors are both
industry and time specifi c. Four years before bankruptcy, the indicators return on assets, inventory
turnover and asset structure are important predictors in both the manufacturing and construction
industries. The net working capital to total assets ratio is a specifi c predictor for manufacturing
companies in the third year before bankruptcy, as is the short-term indebtedness indicator. In
the construction industry, specifi c predictors are the net working capital to sales ratio in the third
and fi rst years before bankruptcy, and the interest coverage indicator in all four years preceding
bankruptcy. Were these indicators to be included in a model for an alternative industry, they would
be likely to reduce its accuracy
Description
Citation
E a M: Ekonomie a Management. 2017, vol. 20, issue 2, p. 116-133.
http://www.ekonomie-management.cz/archiv/vyhledavani/detail/1396-the-stability-of-bankruptcy-predictors-in-the-construction-and-manufacturing-industries-at-various-times-before-bankruptcy/
http://www.ekonomie-management.cz/archiv/vyhledavani/detail/1396-the-stability-of-bankruptcy-predictors-in-the-construction-and-manufacturing-industries-at-various-times-before-bankruptcy/
Document type
Peer-reviewed
Document version
Published version
Date of access to the full text
Language of document
en
Study field
Comittee
Date of acceptance
Defence
Result of defence
Document licence
Creative Commons Attribution-NonCommercial 4.0 International
http://creativecommons.org/licenses/by-nc/4.0/
http://creativecommons.org/licenses/by-nc/4.0/