Abstract
In our study, we focused on the assessment of four bankruptcy prediction models, to figure out which model is most appropriate in the conditions of the Slovak business environment. Based on the previous research within the Slovak conditions, we set a portfolio of 4 models to be assessed: Altman model (1984), Ohlson model (1980), indexes IN01 and IN05 that were validated on the sample of 700 Slovak companies. Based on previous studies we expected that IN indexes are superior to Ohlson and Altman model. The excellency of our research lies in validation and assessing the accuracy of bankruptcy prediction models at three levels: the overall accuracy, accuracy of the bankruptcy prediction, and the non-bankruptcy prediction accuracy. This analytical structure enables to look at the topic more complexly and to increase the objectification of accuracy of analysed models. Based on the results, we showed that Ohlson model is not applicable to predict bankruptcy in the Slovak conditions as reached the lowest bankruptcy prediction ability even if has high non bankruptcy prediction ability. On the other hand, we have confirmed our expectation about the bankruptcy prediction ability of index IN05, that is proven to be superior to Ohlson and Altman model and so is the most appropriate model for Slovak business environment.
Highlights
The first studies on the prediction of bankruptcy, that were used as an early warning signal in case of the situation worsening with the risk of this resulting in bankruptcy, were published in the early 20th century (the definitions of bankruptcy see in Boratyn-Journal of Business Economics and Management, 2017, 18(6): 1156–1173 ska 2016)
When we look at the available studies in the field, many authors deal only with the overall accuracy of bankruptcy prediction models in their studies which in the most cases lead to bias results
The results of analyses are structured into three complementary parts, analogous with dimension of accuracy of bankruptcy prediction models
Summary
The first studies on the prediction of bankruptcy, that were used as an early warning signal in case of the situation worsening with the risk of this resulting in bankruptcy, were published in the early 20th century (the definitions of bankruptcy see in Boratyn-Journal of Business Economics and Management, 2017, 18(6): 1156–1173 ska 2016). In parallel with the development of mathematical and statistical methods, predictive bankruptcy models were created. They were developed by the combination of financial ratios and other variables taking the whole financial situation in one number into account, under which the company is classified as an enterprise with or without the risk of bankruptcy in a certain time frame (an overview of models in Bellovary et al 2007). For the purposes of this paper, we selected four models created in other than Slovak conditions to validate them on the sample of Slovak companies. Even if these models we not created for Slovak companies, they have been identified as the most appropriate ones (Delina, Packová 2013)
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