Family businesses and predictability of financial strength: a Hungarian study
The aim of this study is to examine how bankruptcy prediction models forecast financial strength for family businesses. Three predictive tests are used to study financial strength for three consecutive years (2016, 2017 and 2018) for a sample of 462,200 active Hungarian companies using the Amadeus d...
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| Format: | Article |
| Language: | English |
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LLC "CPC "Business Perspectives"
2020-07-01
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| Series: | Problems and Perspectives in Management |
| Subjects: | |
| Online Access: | https://businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/13778/PPM_2020_02_Sagi.pdf |
| _version_ | 1819022860850561024 |
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| author | Judit Sági Nick Chandler Csaba Lentner |
| author_facet | Judit Sági Nick Chandler Csaba Lentner |
| author_sort | Judit Sági |
| collection | DOAJ |
| description | The aim of this study is to examine how bankruptcy prediction models forecast financial strength for family businesses. Three predictive tests are used to study financial strength for three consecutive years (2016, 2017 and 2018) for a sample of 462,200 active Hungarian companies using the Amadeus database and expert data. Complex statistical model tests for credit assessment (bankruptcy predictions) are performed by size and ownership of the companies. It is found that the revised Altman model is impeded by a superfluous high weighting on net working capital; therefore, IN05 Quick Test predicted better chances for businesses in generating cash flows in a small emerging economy. By re-formulating the Bankruptcy Index of Karas and Režňáková and refining its coefficients, the modified Bankruptcy Index is more robust for predicting the financial health of family businesses on a cash flow basis. The test results of this modified Bankruptcy Index confirm the relative advance of family businesses in creating added value for owners. Practical implications arise from a management perspective: family businesses work better with predictability of survival in accordance with the model; therefore, their ability to adapt to financial constraints caused by crises is also more promising. |
| first_indexed | 2024-12-21T04:29:43Z |
| format | Article |
| id | doaj.art-4e1d5d5b044549a7a76c2d3ac1193f53 |
| institution | Directory Open Access Journal |
| issn | 1727-7051 1810-5467 |
| language | English |
| last_indexed | 2024-12-21T04:29:43Z |
| publishDate | 2020-07-01 |
| publisher | LLC "CPC "Business Perspectives" |
| record_format | Article |
| series | Problems and Perspectives in Management |
| spelling | doaj.art-4e1d5d5b044549a7a76c2d3ac1193f532022-12-21T19:15:58ZengLLC "CPC "Business Perspectives"Problems and Perspectives in Management1727-70511810-54672020-07-0118247648910.21511/ppm.18(2).2020.3913778Family businesses and predictability of financial strength: a Hungarian studyJudit Sági0https://orcid.org/0000-0003-4197-3530Nick Chandler1https://orcid.org/0000-0001-7408-0793Csaba Lentner2https://orcid.org/0000-0003-2241-782XDr., Associate Professor, Department of Finance, Budapest Business School, University of Applied Sciences, BudapestDr., Associate Professor, Department of Management, Budapest Business School, University of Applied Sciences, BudapestDr., Professor, Department of Governance and Public Policy, National University of Public Service, BudapestThe aim of this study is to examine how bankruptcy prediction models forecast financial strength for family businesses. Three predictive tests are used to study financial strength for three consecutive years (2016, 2017 and 2018) for a sample of 462,200 active Hungarian companies using the Amadeus database and expert data. Complex statistical model tests for credit assessment (bankruptcy predictions) are performed by size and ownership of the companies. It is found that the revised Altman model is impeded by a superfluous high weighting on net working capital; therefore, IN05 Quick Test predicted better chances for businesses in generating cash flows in a small emerging economy. By re-formulating the Bankruptcy Index of Karas and Režňáková and refining its coefficients, the modified Bankruptcy Index is more robust for predicting the financial health of family businesses on a cash flow basis. The test results of this modified Bankruptcy Index confirm the relative advance of family businesses in creating added value for owners. Practical implications arise from a management perspective: family businesses work better with predictability of survival in accordance with the model; therefore, their ability to adapt to financial constraints caused by crises is also more promising.https://businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/13778/PPM_2020_02_Sagi.pdfbankruptcycapital structurefinancial sustainabilitypredictive testsrevised Altman Z-score |
| spellingShingle | Judit Sági Nick Chandler Csaba Lentner Family businesses and predictability of financial strength: a Hungarian study Problems and Perspectives in Management bankruptcy capital structure financial sustainability predictive tests revised Altman Z-score |
| title | Family businesses and predictability of financial strength: a Hungarian study |
| title_full | Family businesses and predictability of financial strength: a Hungarian study |
| title_fullStr | Family businesses and predictability of financial strength: a Hungarian study |
| title_full_unstemmed | Family businesses and predictability of financial strength: a Hungarian study |
| title_short | Family businesses and predictability of financial strength: a Hungarian study |
| title_sort | family businesses and predictability of financial strength a hungarian study |
| topic | bankruptcy capital structure financial sustainability predictive tests revised Altman Z-score |
| url | https://businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/13778/PPM_2020_02_Sagi.pdf |
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