Abstract
The paper is mainly devoted to the bankruptcy prediction models and their ability to assess a bankruptcy probability for Lithuanian companies. The study showed that the most common type of companies in Lithuania is a private limited company, therefore, the main objective was to analyse such companies’ financial information and by using these results, create a new bankruptcy prediction model, which would allow to predict the bankruptcy probability as accurately as possible. 145 companies (73 already bankrupt and 72 still operating) were chosen as a primary sample and by using multivariate discriminant analysis stepwise method a linear function ZGS has been created. To achieve that, 156 different financial ratios were selected as a primary input data by using correlation calculation between bankruptcy and still operating companies and Mann – Whitney U test techniques. The results showed that 89% of companies were classified correctly, which states that the model is strong enough to predict bankruptcy probability for private limited companies operating in Lithuania in a sufficient accuracy.
Highlights
The bankruptcy problem is always a relevant concern – as of Statistics Lithuania, during the period of 2010–2014, the number of closed bankruptcy cases in Lithuania has been growing by 24.42%, which could mean that the question of how to stop it from happening is becoming very topical
After evaluation of the Lithuanian and foreign bankruptcy prediction models and their achieved results, it was revealed that the best way is to create a model specified for a particular country – all analysed studies concluded that such new model is able to achieve much better results than the globally used popular models
In Lithuania’s case, there are only two bankruptcy prediction models created and their creation conception was applied to joint-stock companies, usage of these models to predict the bankruptcy probability for different type companies is a questionable decision
Summary
The bankruptcy problem is always a relevant concern – as of Statistics Lithuania, during the period of 2010–2014, the number of closed bankruptcy cases in Lithuania has been growing by 24.42%, which could mean that the question of how to stop it from happening is becoming very topical. As of Lithuania, during the last decade, there were several attempts to create it, the application of them is questionable because it covers all companies without distinguishing their nature, market segment, etc., it means that the chance to predict a bankruptcy as good as possible by using such models is not as strong as it should be. The main object of this research – the financial data of 145 bankrupt and still operating private limited companies that are suitable to create a bankruptcy prediction model. By using Lithuanian and foreign scientific sources, methodology of different countries’ bankruptcy prediction models and analysis of their achieved results, the main methodology is formed followed by the objective to create a bankruptcy prediction model for private limited companies operating in Lithuania. The conclusions and recommendations for further studies are given
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