Theoretical and Applied Economics
No. 3 / 2019 (620), Autumn
Sensitivity of bankruptcy prediction models to the change in econometric methods
Mahatma Gandhi Central University, Motihari, Bihar, India
Alok Kumar MISHRA
University of Hyderabad, India
Abstract. Previous studies on bankruptcy prediction focused on identifying significant indicators to predict bankruptcy. Few studies analyzed the impact of the change in space and time but there are limited studies which attempted to investigate the sensitivity of these models to the change in econometric methods. The current study analyses the impact of the change in econometric methods on the predictive performance of Singh and Mishra (2016a) bankruptcy prediction model. A matched pair of 208 companies comprising distressed and non-distressed firms for the period 2006 to 2014 were selected randomly. The study utilises Multivariate Discriminant Analysis (MDA), logit and probit econometric techniques to model bankruptcy. Secondary sample, long range accuracy and Receiver Operating Characteristic (ROC) tests were used for the validation of bankruptcy prediction models. The major findings of the study suggest that accounting information’s, namely, leverage, profitability and turnover ratio remained significant indicators to predict bankruptcy for Indian manufacturing firms. The study further concludes, if significant indicators of bankruptcy are identified, then there is no significant impact of the change in econometric methods on the predictive performance of the default prediction models.
Contents
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Currency risk management model
Assessing the performance of Pillar II in Romania – time weighted versus money weighted rate of return
Does democracy increase total tax revenues? The case of selected OECD countries
An evaluation of the turnover tax system in South Africa
Sensitivity of bankruptcy prediction models to the change in econometric methods
Risk management associated with the interbank relationships
Challenging the status quo: Steel producer case study on the enterprise value for M&A
Innovation as imperative for increasing productivity and economic growth: The case of the selected EU member countries and non-EU member countries
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The effect of oil prices on foreign trade deficit in the economics of Bulgaria
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Profit management in the case of financial distress and global volatile market behaviour: Evidence from Borsa Istanbul Stock Exchange
Insurance consumption in the Maghreb countries (Algeria, Morocco and Tunisia): Financial and institutional determinants
Non-linear finance-growth nexus for African countries: A panel smooth transition regression approach