The Evaluation of the Success Rate of Corporate Failure Prediction in a Five-Year Period
The development of bankruptcies in the Czech Republic is closely related to the impact of the global financial economic crisis, which, among other things, has also affected the competitiveness of Czech companies to a great extent. The future state of overall company financial health can be determine...
| Main Authors: | , , |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
Tomas Bata University in Zlín
2020-03-01
|
| Series: | Journal of Competitiveness |
| Subjects: | |
| Online Access: | https://www.cjournal.cz/files/358.pdf |
| _version_ | 1811314908862611456 |
|---|---|
| author | Martin Pech Jaroslava Prazakova Lucie Pechova |
| author_facet | Martin Pech Jaroslava Prazakova Lucie Pechova |
| author_sort | Martin Pech |
| collection | DOAJ |
| description | The development of bankruptcies in the Czech Republic is closely related to the impact of the global financial economic crisis, which, among other things, has also affected the competitiveness of Czech companies to a great extent. The future state of overall company financial health can be determined through prediction models. This paper discusses the history of financial analysis and the most widely used models, with the main purpose of the paper to compare the accuracy of various prediction models and to decide which model has the highest prediction success rate. The sample consisted of the total of 90 Czech companies, out of which 1/2 were companies in bankruptcy and 1/2 were non-bankrupt companies. Ratio indicators of given models were calculated from balance sheets as well as profit and loss statements for a five-year period. The reliability of the accurate classification of accounting units is verified by a confusion matrix. The highest total success rate of classification was achieved by Zmijevski model, which had the highest predictive value. Another partial objective of the paper is to determine whether the accuracy rate of the bankruptcy models changes with branches within which the companies operate. The hypothesis about differences between the branches is confirmed. The most statistically significant differences were shown between Wholesale and Retail and the Processing Industry, with the results of models varying among different branches. The results show that taking into account the branches the company is operating in is advisable for selecting prediction models. |
| first_indexed | 2024-04-13T11:20:49Z |
| format | Article |
| id | doaj.art-3258e91f190a4f9dbcd6f46db1fa0317 |
| institution | Directory Open Access Journal |
| issn | 1804-171X 1804-1728 |
| language | English |
| last_indexed | 2024-04-13T11:20:49Z |
| publishDate | 2020-03-01 |
| publisher | Tomas Bata University in Zlín |
| record_format | Article |
| series | Journal of Competitiveness |
| spelling | doaj.art-3258e91f190a4f9dbcd6f46db1fa03172022-12-22T02:48:50ZengTomas Bata University in ZlínJournal of Competitiveness1804-171X1804-17282020-03-0112110812410.7441/joc.2020.01.07The Evaluation of the Success Rate of Corporate Failure Prediction in a Five-Year PeriodMartin Pech0https://orcid.org/0000-0002-0807-3613Jaroslava Prazakova1https://orcid.org/0000-0003-3676-0602Lucie Pechova2University of South Bohemia in České Budějovice, Faculty of EconomicsUniversity of South Bohemia in České Budějovice, Faculty of EconomicsUniversity of South Bohemia in České Budějovice, Faculty of EconomicsThe development of bankruptcies in the Czech Republic is closely related to the impact of the global financial economic crisis, which, among other things, has also affected the competitiveness of Czech companies to a great extent. The future state of overall company financial health can be determined through prediction models. This paper discusses the history of financial analysis and the most widely used models, with the main purpose of the paper to compare the accuracy of various prediction models and to decide which model has the highest prediction success rate. The sample consisted of the total of 90 Czech companies, out of which 1/2 were companies in bankruptcy and 1/2 were non-bankrupt companies. Ratio indicators of given models were calculated from balance sheets as well as profit and loss statements for a five-year period. The reliability of the accurate classification of accounting units is verified by a confusion matrix. The highest total success rate of classification was achieved by Zmijevski model, which had the highest predictive value. Another partial objective of the paper is to determine whether the accuracy rate of the bankruptcy models changes with branches within which the companies operate. The hypothesis about differences between the branches is confirmed. The most statistically significant differences were shown between Wholesale and Retail and the Processing Industry, with the results of models varying among different branches. The results show that taking into account the branches the company is operating in is advisable for selecting prediction models.https://www.cjournal.cz/files/358.pdfbankruptcy modelsbankruptcy predictionfinancial statement analysiscorporate financecompetitiveness |
| spellingShingle | Martin Pech Jaroslava Prazakova Lucie Pechova The Evaluation of the Success Rate of Corporate Failure Prediction in a Five-Year Period Journal of Competitiveness bankruptcy models bankruptcy prediction financial statement analysis corporate finance competitiveness |
| title | The Evaluation of the Success Rate of Corporate Failure Prediction in a Five-Year Period |
| title_full | The Evaluation of the Success Rate of Corporate Failure Prediction in a Five-Year Period |
| title_fullStr | The Evaluation of the Success Rate of Corporate Failure Prediction in a Five-Year Period |
| title_full_unstemmed | The Evaluation of the Success Rate of Corporate Failure Prediction in a Five-Year Period |
| title_short | The Evaluation of the Success Rate of Corporate Failure Prediction in a Five-Year Period |
| title_sort | evaluation of the success rate of corporate failure prediction in a five year period |
| topic | bankruptcy models bankruptcy prediction financial statement analysis corporate finance competitiveness |
| url | https://www.cjournal.cz/files/358.pdf |
| work_keys_str_mv | AT martinpech theevaluationofthesuccessrateofcorporatefailurepredictioninafiveyearperiod AT jaroslavaprazakova theevaluationofthesuccessrateofcorporatefailurepredictioninafiveyearperiod AT luciepechova theevaluationofthesuccessrateofcorporatefailurepredictioninafiveyearperiod AT martinpech evaluationofthesuccessrateofcorporatefailurepredictioninafiveyearperiod AT jaroslavaprazakova evaluationofthesuccessrateofcorporatefailurepredictioninafiveyearperiod AT luciepechova evaluationofthesuccessrateofcorporatefailurepredictioninafiveyearperiod |