Abstract
A huge number of articles and papers devoted to the study of bankruptcy prediction problems. Solving the problem of predictive ability many difficulties arise from the processing of data ending with the choice of models and algorithms. Efficiency is formed on the basis of three key aspects, such as tools, data quality and algorithms, formed based on the correct formulation of the problem. This research raises the problem of predicting the probability of bankruptcy using the method of neural network modeling. The paper proposes an effective prediction algorithm, in comparison with conventional parametric methods and is able to correctly classify on average more than 94% of observations in the sample of Russian small, medium and large businesses. Also during the research, the issue of data processing was touched upon. By the principal components method of neural networks, factors affecting the bankruptcy and key turning points that could lead to destabilization of the company’s normal operations were discovered. Increasing the accuracy of the forecast can be achieved by using more sophisticated algorithms, which are hybrid models.
Highlights
In recent years the Russian economy has been exposed to most complex stress tests, the issue of corporate bankruptcy still appears relevant
It is related to many factors: high risk strategies, currency fluctuations, sanctions imposed by the USA and Western countries in order to destabilize the Russian economy and financial system, geopolitical environment in the Russian Federation
A large number of articles is dedicated to improvement of quality of bankruptcy prediction
Summary
In recent years the Russian economy has been exposed to most complex stress tests, the issue of corporate bankruptcy still appears relevant. It is related to many factors: high risk strategies, currency fluctuations, sanctions imposed by the USA and Western countries in order to destabilize the Russian economy and financial system, geopolitical environment in the Russian Federation. The result is that the Russian economy is subjected to serious fluctuations. Sometimes even in a stable economic environment due to wrong strategies or internal problems some companies find themselves in a pre-bankruptcy state. Bankruptcy of large, strategically important industry participants may result in problems for directly associated economic agents, but for the economy in general. A proper tool which predicts beforehand critical states and possible bankruptcy of a company may prevent wrong resolutions of management, investors, banks and other creditors. The correct risk assessment related to financial instability of a company may prevent economic downturn in general in case of a crisis
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Schedule a callMore From: Journal of Corporate Finance Research / Корпоративные Финансы | ISSN: 2073-0438
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