966
Number: 05/2017
Author(s): Jeyhun A. Abbasov
Language: English
Date: December 20, 2017
Abstract: In this work 10 financial ratios of 835 companies (48 companies were default and 787 companies were non-default) were used for prediction of bankruptcy. On the base of different combinations of these ratios which were formed by the taking one ratio from each financial factor such as financial leverage, capital turnover, cash position, etc., 16 z-score models estimated. Unfortunately, there was small compliance for predictability power of these bankruptcy models. On the other hand, we separately used all ratios (for example; X3 – cash/Total Assets, X6 – cash/Sales) classified by the same factor (for X3 and X6, cash position) in different models and found that it doesn’t change the result of the predictability power of the bankruptcy models. Fortunately, this result shows the same pattern with most of the papers in this area.
Keywords: Kappa test, Altman’s z-score, Edmister’s z-score, predictability power, prediction of bankruptcy
JEL classification: G33, C21
