Article2011

Forecasting corporate bankruptcy: empirical evidence on Italian data

Alessandra Amendola · Marco Bisogno · Marialuisa Restaino · Luca Sensini

14 citations0/0 files storedEuroMed Journal of Business

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Financial Distress and Bankruptcy Prediction Corporate Insolvency and Governance Forecasting Techniques and Applications

Abstract

Purpose The aim of the paper is to investigate several aspects of bankruptcy prediction within both theoretical and empirical frameworks. In particular, it has focused on the comparison of different techniques used to forecast failure through a balanced sample of companies within a geographical area (the Campania region) located in the south of Italy. Methodology Business failure has been one of the most investigated topics within corporate finance and the empirical approach to bankruptcy prediction has recently gained further attention from financial institutions. The aim of corporate failure prediction is to have a methodological approach which discriminates firms with a high probability of future failure from those which are considered to be healthy. Starting from the seminal paper of Altman (1968), many other significant contributions have been subsequently made to this field (Ravi Kumar and Ravi, 2007). This paper's approach is to compare different statistical techniques based on the analysis of financial data for the prediction and diagnosis of the risk of bankruptcy. Findings The paper investigates the determinants of bankruptcy in a specific geographical area (Campania region). Empirical evidence on a data‐set of the annual reports of a balanced sample of companies for a given time period has been analyzed. These findings aim to make a contribution to current literature as well as to contribute to the elaboration of efficient prevention and recovery strategies. Originality Researchers have tended to restrict the scope of their analysis due to the problems related to the collection and storage of financial data. This study focuses on financial information relating to the area of interest in order to provide a comparative analysis of different forecasting techniques.

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References

1968FINANCIAL RATIOS, DISCRIMINANT ANALYSIS AND THE PREDICTION OF CORPORATE BANKRUPTCY 1974ON THE PRICING OF CORPORATE DEBT: THE RISK STRUCTURE OF INTEREST RATES*1980Financial Ratios and the Probabilistic Prediction of Bankruptcy 1966Financial Ratios As Predictors of Failure 1984Methodological Issues Related to the Estimation of Financial Distress Prediction Models 2001Forecasting Bankruptcy More Accurately: A Simple Hazard Model 1995A Simple Approach to Valuing Risky Fixed and Floating Rate Debt 1996Optimal Capital Structure, Endogenous Bankruptcy, and the Term Structure of Credit Spreads

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