A review on financial failure models- The case of manufacturing industry

Abstract

Increasingly globalized economic and financial dynamics create extensive complexity and uncertainty for national economies and businesses. As a result of this financial stress experienced by firms, researchers have developed models using financial ratios to measure the financial health of firms. One of the implications of this situation for academic research is the continued importance of predicting and modelling financial failure for businesses. This study aims to apply existing financial failure and bankruptcy prediction models to the financial data of 45 manufacturing enterprises traded in Borsa Istanbul and to establish a comparative analysis framework of the prediction results. In order to explain the risk of financial failure and bankruptcy, the financial statements of the enterprises covering the years 2011-2020 are used as a data set. Altman Z-Score, Springate S-Score and Zmijevski J-Score values of these 45 enterprises were calculated and based on them, predictions were made about the financial viability of the enterprises. In addition, financial failure models measured by Altman Z-Score, Springate S-Score and Zmijevski J-Score were used in the study. According to the findings, while Altman Z-Score and Springate S-Score show similar results, they are not similar to the results of Zmijevski J-Score.