Abstract
The article presents selected Polish early warning models (logit and discriminant models) that allow the assessment of the risk of bankruptcy of a company, and the purpose of the considerations is to indicate their prognostic effectiveness in predicting susceptible Polish companies one year before their declarations of bankruptcy. The limitations of these methods were also indicated in unpredictable situations, such as the outbreak of an economic crisis, e.g., caused by a humanitarian crisis—the COVID-19 pandemic. Another aim chosen in the article is a methodological critical assessment of the phenomenon of widespread use of foreign models (including the common Altman method) in the study of the risk of bankruptcy of Polish enterprises. Models developed on a sample of foreign enterprises without prior adaptation to domestic conditions are used all over the world, so the conclusions of the article are applicable internationally. The research was based on a query of Polish and foreign literature in the field of economic and legal aspects of bankruptcy and financial analysis, including, in particular, bankruptcy forecasting. The empirical research analyzes the financial data of 50 Polish enterprises from 2017 to 2018. The effectiveness of the selected bankruptcy forecasting models in identifying enterprises from section C of the Polish economy (industrial processing) that filed for bankruptcy in 2018 and 2019 was tested. The time frame fully allows for the identification and the assessment of the effectiveness of early warning models a year before bankruptcy.
Highlights
Due to the fact that early warning models should be used in the country of the establishment of a given enterprise, the sample included 19 models developed for the Polish economy and only one foreign model by E
The aim of the article was to verify the diagnostic reliability of selected discriminant and logit models, which are included in the early warning systems of the risk of enterprise bankruptcy
Foreign models without prior adaptation to domestic conditions are used in Polish economic practice and by scientists, statutory auditors, and financial directors and managers in many countries. As it results from the review of the literature on the subject and the presented research, such an uncritical transfer of a foreign model with original assumptions does not bring reliable results
Summary
Schumpeter [1], one of the most powerful mechanisms of economic progress is the so-called creative destruction—a phenomenon in which the bankruptcy of enterprises is an integral part. This phenomenon can be considered natural, as it acts as a means of natural selection [2]. From the theoretical point of view, the bankruptcy of an enterprise is part of a self-regulatory market mechanism and may be a condition for market development; when considered in terms of the interest of the enterprises, it becomes an unfavorable phenomenon [5]. That they are escalating globally (both in absolute and relative terms) [2]
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