Analysis of bankruptcy factors of the Russian developers

Abstract

In 2019, there was a transition to project financing of housing construction in Russia. As a result, by the end of 2021, more than 73% of the area of apartments under construction are sold using escrow accounts. However, about 21% of the apartments being sold are being built by developers who are in the process of bankruptcy. Regional primary housing markets are, firstly, segmented, and secondly, in some regions – mainly in the regions of the Far North, Eastern Siberia and the Far East – there is a high concentration of developers, which can lead to additional negative consequences in terms of the development of housing markets of these regions in case of bankruptcy of regional companies. In this situation, it is important to form additional tools for assessing the risks of bankruptcy of companies in order to be able to prevent negative consequences in a timely manner in the future. Despite the fact that a large number of scientific publications of both foreign and domestic researchers have been devoted to the issues of modeling the risks of bankruptcy of firms, only a small number of authors have addressed the issues of assessing the financial stability of Russian developers. The novelty of this study consists in constructing a model for predicting the probability of bankruptcy of developers in Russia (that is, a risk management system) based on an original database, which, in addition to financial coefficients from companies' reports, also includes industry-specific indicators. The aim of the work is to build a quantitative model of bankruptcy risks of developers (in the short and medium term) based on easily observable characteristics of their activities. The results obtained show that the probability of bankruptcy is high for companies with low values of return on assets, asset turnover ratio and current liquidity ratio. Additional factors that reduce the likelihood of bankruptcy are the fact of the developer's group membership, experience in housing construction. Also, the financial stability of companies in the industry as a whole is affected by macroeconomic shocks.