Probability Of Bankruptcy Research Articles

Research on Natural Disaster Risk Based on Garch Volatility and Monte Carlo Algorithm

The purpose of this paper is to study the optimal decision problem of different agents. Firstly, the expression of the profit process of the insurance company is established, and then the loss caused by the natural disaster is fitted into the insurance formula using the double cross-verified natural disaster model. The first is the prediction model of random disaster loss based on Garch volatility test. The other is ridge regression, which combines the possible relevant factors and then makes the forecast. The two results were cross-verified by Garch volatility test again, and then risk assessment and scheme decision were made based on Monte Carlo algorithm and time value theory, and 50,000 simulations were carried out. By estimating the probability of frequency, the probability of bankruptcy under different premiums is obtained. This paper makes an empirical study of New Mexico and Henan in China. For the United States, the paper concludes that an average unit price of $34-35 per policy is appropriate. For Henan Province, this paper focuses on the implementation of natural disaster insurance, and carries out model simulation. The result shows that the premium price of 15% bankruptcy rate is 8 ~ 10 yuan, which is lower than the current policy price, proving that the policy has advantages.

Регуляторний вплив держави на діяльність банків як категорія системного управління (сутність і метрологія)

Introduction. System management is based on the recognition of management objects as integral groups. The essence of the regulatory influence of the state on the activities of a bank is considered as a way to change project standards and current indicators of its financial stability with the justification of organizational measures to ensure stable functioning and development. Problem Statement. System management of an integral group involves a systemic analysis of the management object as a single whole with the determination of the properties and relationships of the system components: input, process, output, goal, direct and feedback, and limitations. The purpose is to determine the market characteristics of the regulatory influence of the state on the activities of banks as a category of system management, its content, metrology, and signs of complexity. Methods. The conceptual provisions of system analysis, methods of clarifying the content, properties of integrity, self-organization and stability of the system, their structuring, as well as program-targeted design were used. Results. Market characteristics were systematized and the social status of the state's regulatory influence on the activities of banks as a category of systemic management was substantiated. The integrity of the state'scomplex regulatory influence on the activities of banks was substantiated by means of a “three-story” classification of its components and the results of their interaction. Conclusions. The use of the conceptual provisions of systems theory to clarify the nature of the state's regulatory influence on the activities of banks revealed the processes of its formation as a category of systemic management. The metrology of such influence consists in monitoring and comparative assessments of: indicators of financial stability and stability of banks with the economic standards of the NBU; leading indicators of measuring the financial condition and probability of bankruptcy of banks; dynamics of the market value of banks as a target criterion of complex regulatory influence.

ANALYSIS OF FINANCIAL RESULTS AND DIAGNOSTICS OF THE PROBABILITY OF BANKRUPTCY OF AN INDUSTRIAL ENTERPRISE

The article presents methods for analyzing the financial results of an industrial enterprise as the basis of financial management. The key aspects of assessing the efficiency of the enterprise through horizontal and vertical analysis of financial indicators, as well as analysis of financial ratios are investigated. Particular attention is paid to the diagnosis of the probability of bankruptcy of an enterprise, for which the Altman model is applied. The findings of the study demonstrate the financial stability and risks that may affect the enterprise. The article analyzes the financial results and diagnoses the probability of bankruptcy of industrial enterprises, in particular, Glass Alliance LLC, in the context of the current economic environment of Ukraine. The main purpose of Glass Alliance LLC is to make a profit by carrying out economic activities aimed at meeting the market needs for high-quality glass products. The study focuses on assessing the financial stability of the company using the methods of horizontal and vertical analysis, as well as the calculation of financial ratios. The authors analyze the dynamics of indicators such as net income, gross profit, cost of goods sold, administrative and selling expenses, as well as other operating expenses, and conclude on the main trends in the company's development in 2020-2022. The calculation based on the Altman model demonstrates a high risk of the company's bankruptcy, which requires immediate financial measures to stabilize the financial condition. The article emphasizes the importance of analyzing financial ratios for risk diagnostics and recommends that the company's management take measures to increase liquidity, optimize costs and improve the efficiency of asset use. The results of the study may also be useful for other business entities that face similar problems in the analysis of financial results and bankruptcy diagnostics. The proposed methods and approaches can be adapted and used to improve analytical procedures at other enterprises seeking to increase their financial stability in the face of economic uncertainty.

Bankruptcy Prediction Analysis of General Insurance Companies Using the Ohlson Model

General insurance companies play an important role in maintaining economic stability by transferring financial risks from individuals and companies to insurance companies. However, insurance companies are not immune to the risk of bankruptcy that can arise due to factors such as inability to manage claims, premium fluctuations, and insufficient capital. Early detection of potential bankruptcy becomes very important to prevent greater losses. This study aims to analyze the prediction of bankruptcy in general insurance companies in Indonesia using the Ohlson Model. The Ohlson model is based on logistic regression, taking into account several financial variables such as leverage, profitability, and company size to estimate the probability of bankruptcy. The results of the study are expected to provide insights for insurance company management and regulators in identifying bankruptcy risks and taking appropriate preventive measures. In addition, this study contributes to enriching the literature related to the application of bankruptcy prediction models in the context of the insurance industry in emerging markets. From the analysis, it was found that out of 13 general insurance companies listed on the Indonesia Stock Exchange (IDX), the Ohlson value for all companies is below 0.38, which indicates that the sampled companies still have fairly good financial stability. The research results are expected to provide insights for insurance company management and regulators in identifying bankruptcy risks and taking appropriate preventive measures. In addition, this study contributes to enriching the literature related to the application of bankruptcy prediction models in the context of the insurance industry in emerging markets.

The equilibrium strategy of insurance companies’ dividends and reinsurance games

We investigated the optimal risk management strategies of an insurance company within a two-player non-cooperative differential game framework. The key feature of this model is considering the company’s surplus as a strategic variable to make the insurance company more attractive to shareholders. In this setup, shareholders are participants who demand a share of the surplus, while managers are participants concerned with the risk management of the surplus. The objective of the shareholders is to maximize the expected discounted dividends. We address this asymmetric game under two different assumptions about the managers’ objectives: in the first scenario, the managers aim to minimize the probability of bankruptcy; in the second scenario, the managers aim to maximize the expected discounted utility derived from the surplus.

Large Book‐Tax Differences, Bankruptcy and Firm Efficiency

ABSTRACTIn this study, I investigate the relationship between large book‐tax differences (BTDs) and the probability of firm bankruptcy and financial distress. I argue that large BTDs provide valuable information regarding corporate bankruptcy. Using the Altman Z‐score and Ohlson O‐score models, I find that firms with large negative BTDs (LNBTDs) are less likely to experience financial difficulty and bankruptcy. In contrast, firms with large positive BTDs (LPBTDs) show a higher likelihood of financial distress and bankruptcy. Additionally, the LNBTD subset, contrary to the LPBTD group, demonstrates higher firm efficiency.

Research on the Bankruptcy Tendency of the United States Bankrupt Commercial Banks during the 2008 financial crisis

With the rapid development of the financial market, banks are faced with increasingly frequent capital flows and rapidly changing business environment. It is an important prerequisite for commercial banks to control their liquidity risk to deeply study the causes of liquidity risk and clarify its economic consequences. In the financial crisis during 2007-2009, American commercial banks were directly impacted by liquidity risk. The characteristics of their bankrupted banks are of great significance to the study of how to avoid bank liquidity losses. This study found that in aspect of the probability of commercial banks bankruptcy, the larger scale the banks’ current deposit is in the initial stage, the larger rate of the loan is. The larger the loan issuance ratio is in perportion, the worse the liquidity management of commercial banks’ efficiency acts. And other characteristics make the bank's bankruptcy probability greater. This result has reference significance for commercial banks in China.

Taking ESG strategies for achieving profits: a dynamic panel data analysis

PurposeThe goal is to investigate the relationship between financial performance and environmental, social and governance (ESG) indicators and disclosures for a sample of Latin American firms.Design/methodology/approachDynamic panel data regressions are used to analyze a sample of 114 companies listed on the Latin American Integrated Market, MILA (Chile, Colombia, Mexico and Peru) for the period 2011–2020. The Altman Z-score and Piotroski F-score are used as indicators of the probability of default and comprehensive financial strength. Models are developed in which the relationship between economic value added (EVA) and Jensen’s alpha are evaluated against firms’ ESG practices.FindingsA direct relationship between ESG strategies and financial performance was found. Better practices and transparency in ESG are related to lower probability of bankruptcy, greater financial strength, greater EVA and superior risk-adjusted returns.Research limitations/implicationsESG data were obtained from the Bloomberg system based on a methodology that may differ from other sources. The sample covers four Latin American countries and large corporations. Independent variables were selected for their perceived validity, given their frequent use in previous studies.Practical implicationsEvidence for company management regarding the importance of strengthening ESG practices and reporting should be part of their balanced scorecards. For investors, the results support the importance of evaluating ESG practices in asset selection.Originality/valueThe present study is the first research to present empirical evidence on the relationship between ESG scores and disclosures for MILA countries, using a comprehensive set of financial performance indicators (Altman Z-scores, Piotroski F-scores, EVA and Jensen’s alpha).

Analysis of the Effect Financial Ratios to Probability Default With the Risk as Moderation in Indonesian Building Construction Sub-Sector Companies

The construction and building sector are one of the important sectors for Indonesia development and economy, furthermore it is also being an indicator in assessing the economic development of a country. The development in the sector of construction and building, which is currently facing intense market competition, is encouraging many companies to improve their management fundamentals. A company's inability to anticipate changes can result the decreasing in business volume, which eventually has a negative impact on profits and caused bankruptcy. The aim of this research is to analyze the effect of GPM, NPM, CR, DER, TIE, and TATO by moderating risk on probability default (probability of bankruptcy) in the construction and building companies in Indonesia which registered on the IDX for the 2014-2023 period. The research method used in this research is a panel data model to estimate the coefficient model. The result shows that Total Assets Turnover (TATO) has a positive and significant effect on the probability of bankruptcy. Meanwhile, Gross Profit Margin (GPM), Net Profit Margin (NPM), Current Ratio (CR), Debt Equity Ratio (DER), and Times Interest Earned (TIE), does not have a significant effect on the probability default in the construction and building companies.

The Probability of Hospital Bankruptcy: A Stochastic Approach

Healthcare leaders are faced with many financial challenges in the contemporary environment, leading to financial distress and notable instances of bankruptcies in recent years. What is not well understood are the specific conditions that may lead to organizational economic failure. Though there are various models that predict financial distress, existing regression methods may be inadequate, especially when the finance variables follow a nonnormal frequency pattern. Furthermore, the regression approach encounters difficulties due to multicollinearity. Therefore, an alternate stochastic approach for predicting the probability of hospital bankruptcy is needed. The new method we propose involves several key steps to better assess financial health in hospitals. First, we compute and interpret the relationship between the hospital’s revenues and expenses for bivariate lognormal data. Next, we estimate the risk of bankruptcy due to the mismatch between revenues and expenses. We also determine the likelihood of a hospital’s expenses exceeding the state’s median expenses level. Lastly, we evaluate the hospital’s financial memory level to understand its level of financial stability. We believe that our novel approach to anticipating hospital bankruptcy may be useful for both hospital leaders and policymakers in making informed decisions and proactively managing risks to ensure the sustainability and stability of their institutions.

Bank-tax-interaction, carbon emission reduction investment and financing decisions for SMEs

In this paper, we integrate bank-tax interaction (BTI) into a dynamic model in which the small- and micro-sized enterprises (SMEs) face debt issuance constraints and the challenge of low-carbon transformation. We analyze the interplay between investments in carbon emission reduction and financing decisions. The model generates the following implications: Firstly, BTI effectively removes the debt issuance constraints for the SMEs. Additionally, an increased credit multiple not only accelerates investment in carbon emission reduction but also reduces the bank’s credit line, lowers the optimal coupon, and simultaneously increases the probability of bankruptcy, leading to higher credit spreads for the SMEs.

АНАЛИЗ ВЕРОЯТНОСТИ НАСТУПЛЕНИЯ БАНКРОТСТВА АО «УЗБЕКИСТОН ТЕМИР ЙУЛЛАРИ»

This work is an analysis of the probability of bankruptcy of Uzbekistan Temir Yullari JSC using methods and models of probabilistic analysis. The article discusses various aspects that influence the financial condition of the company, such as the two-factor “Altman Z model”, the five-factor “Altman Z model”, the “Lis model” and the “Saifullin model”. The main focus is on the development of models and methods for predicting insolvency and their application in risk assessment and decision-making in corporate financial management. The results and conclusions of the study will be useful to shareholders and creditors, as well as business managers when making strategic decisions and managing financial risks.

Bankruptcy mechanism based on accumulated payoff and age promotes cooperation in coevolutionary games

When individuals or companies are unable to meet their financial obligations, they may undergo the process of bankruptcy and go out of business. At the same time, new companies may arise. In this work, we propose a coevolutionary game model incorporated with bankruptcy. In the model, each agent represents a company. Two factors, accumulated payoff and age, are taken into account to determine its bankrupt probability. We assume two possible bankrupt mechanisms, procedural bankruptcy and age-dependent bankruptcy. Through numerical simulations, we show that the bankruptcy can effectively promote cooperation. Moreover, we find the non-monotonic behavior of the cooperation level with the increase of noise intensity in procedural bankruptcy. By investigating the strategy patterns and the distributions of the bankruptcy probabilities for cooperators and defectors, we provide explanations for the promotion of cooperation and the optimization of the cooperation level. This work highlights the positive effects of bankruptcy mechanism on cooperation in the real business world.

Research on sustainability of property insurance based on insurance stochastic model

This paper analyzes the sustainability of property insurance under extreme weather events using an insurance stochastic model in Europe and South America. First, disaster risk losses in Estonia and Mexico City were assessed and modeled using the Kramer-Lundberg risk model. Then, the approximate result of bankruptcy probability under specific initial capital distribution is obtained by parameter adjustment and calculation. The study found that in order to maintain a 10% profit, premiums in high-risk areas would have to be 4.6 times higher than those in medium-risk areas. Therefore, the price of buying insurance in Estonia must be 4.6 times higher than in Mexico City to remain profitable. This paper provides decision support for insurance companies in changing environment to ensure long-term stable development.

User Sentiments And Bankruptcy: The Case Of Cyberpunk 2077

This research investigates the correlation between customer sentiments of products and a firm’s probability of bankruptcy. Utilizing the latest version of Altman’s model, user sentiment movements of The Witcher games and Cyberpunk 2077 are compared to CD PROJEKT S.A.s Z’’-score, which includes Working Capital/Total Assets, Retained Earnings/Total Assets, EBIT/Total Assets and Book Value of Equity/Book Value of Total Liabilities for every semester from 2013 to 2023. The results indicate that the relationship between them is weak yet positive, but ultimately insignificant. The literature review investigates the potential cause of this, and concludes that the relationship is not as simple as a bivariate correlation would indicate. Evidence suggests the existence of moderating variables, the possibility that a partial-mediating model is more accurate, and how the industry of the firm could change the nature of customer sentiments.

Crisis resilience assessment and management of public utility companies

Currently, the most frequently used models for forecasting the probability of company bankruptcy in the housing and utilities sector lack accuracy. The hypothesis is put forward that crisis resilience of a company can be assessed based on its adaptive capabilities. The paper aims to construct a more accurate compared to the known regression model for predicting bankruptcies, as well as develop models for assessing the quality of crisis adaptation management at public utility companies allowing for the stakeholders’ interests and peculiarities of their interface. The methodological basis of the study consists of the theory of crisis management and a stakeholder approach. The methods include multiple regression analysis, stakeholder mapping, sociological survey, and expert assessments. The evidence comes from the accounting and statistical reporting of 49 public utility companies, materials of arbitration cases, survey results of 33 heads of organisations obtained in the period from February to March 2023. The theoretical developments are implemented within the empirical studies of public utility companies. To improve crisis adaptation and resilience of public utility companies the findings recommend to launch staff training programmes, establish mechanisms for horizontal intra-sectoral connections and maintain cooperation at the level of public authorities in order to control investments in the housing and utilities sector.

ДІАГНОСТИКА ЙМОВІРНОСТІ БАНКРУТСТВА ПІДПРИЄМСТВ

Formulation of the problem. In the period of today's complex challenges - the conduct of military operations on the territory of Ukraine, the consequences of the pandemic, an unfavorable investment climate, and others - the detection of the probability of bankruptcy of enterprises is of particular importance. Timely detection of the onset of crisis phenomena using various methods and models and the adoption of precautionary measures ensure the avoidance of financial instability in the future. Therefore, conducting a timely diagnosis of the probability of bankruptcy is relevant, because there is a growing need for effective financial management in order to achieve the goals set by enterprises in the long term. The purpose of the research is to build a methodology for diagnosing the probability of bankruptcy of enterprises based on various bankruptcy models, based on the conditions of their activity, and to form forecasts of their further development on this basis. The object of the research is the process of constructing a diagnosis of the probability of bankruptcy of aviation industry enterprises. The method of the research - its became modern methods and principles of scientific knowledge, methods and techniques for evaluating bankruptcy diagnostics, tools of financial and economic analysis, models for forecasting further development, which allowed to combine existing approaches for multifaceted assessment of the probability of bankruptcy and identification of factors affecting the unstable activity of enterprises. The hypothesis of the research there was an assumption about the possibility of building a methodology for diagnosing the probability of bankruptcy of enterprises using modern, widely used methods of assessing bankruptcy, financial analysis of the results of operations and forming forecasts of further stable development. The statement of basic materials. The article examines the main stages of diagnosing the probability of bankruptcy of aviation enterprises, which provides an opportunity to determine the factors that generate unstable activity, develop appropriate countermeasures to avoid problem areas, and predict the improvement of development conditions. It is emphasized that each individual enterprise can use its own methods of assessing the probability of bankruptcy, which require the development of further specific anti-crisis measures, but the proposed method allows a comprehensive and thorough approach to the prompt detection and avoidance of crisis phenomena at enterprises. The originality and practical significance of the research is confirmed by the approbation of the proposed methodology for diagnosing the probability of bankruptcy at aviation industry enterprises. Conclusions and perspectives of further research. It has been proven that the use of the proposed methodology for diagnosing the probability of bankruptcy at enterprises allows recognizing and identifying threats, predicting their consequences, making operational decisions regarding the elimination of threats and adjusting the strategic goals of the enterprise's development. Further research will be aimed at assessing the probability of bankruptcy of enterprises in priority sectors of the national economy and developing measures for their recovery activity.

ФІНАНСОВЕ ПРОГНОЗУВАННЯ В АНТИКРИЗОВОМУ УПРАВЛІННІ ПІДПРИЄМСТВ

Formulation of the problem. The article is devoted to the problem of financial forecasting as a tool of anti-crisis management. The purpose of the study is to develop the theoretical and methodological foundations of financial forecasting in anti-crisis management based on an integrated approach. The object of the study is financial forecasting in anti-crisis management of the enterprise. Methods used in the research: scientific knowledge, method of generalization, comparison, logical and meaningful, methods of induction and deduction, analysis. The research hypothesis consists in the assumption of the need to develop the theoretical and methodological foundations of financial forecasting in anti-crisis management based on a comprehensive approach, which involves the use of a flexible toolkit of diagnostics, analysis and forecasting, which provides an opportunity to identify the onset of the risk of crisis events and to form options for the development trends of enterprises and vectors of the anti-crisis strategy, taking into account changes in the economic environment. Presenting main material. The prerequisites, essence, subject field and fundamental characteristics of the conceptual provisions of financial forecasting in anti-crisis management are highlighted, which provides a holistic view of its organizational and methodological support based on a comprehensive approach. The methods of financial forecasting at the enterprise are systematized and the features of their scope of application, advantages and disadvantages, selection criteria are revealed. The expediency of using methods for diagnosing the bankruptcy of enterprises in conditions of instability is substantiated, and a list of critical indicators of the probability of bankruptcy of the enterprise is given. The sequence of the process of developing financial forecasts in the format of the balance sheet is proposed. Originality and practical significance are the recommendations regarding the proposed methodical approach to the development of financial forecasts in the format of a balance sheet model of itemized calculation of assets and liabilities, based on financial reporting data, which provides an opportunity to generate information to justify management decisions on the choice of an enterprise development strategy based on the criterion of value maximization. Conclusions. The implementation of recommendations for the development of theoretical and methodological provisions of financial forecasting in anti-crisis management based on an integrated approach provides a holistic view of the sequence of the forecasting process and the use of its tools to justify anti-crisis mechanisms aimed at finding reserves to ensure the continuity of business operations. The use of flexible financial forecasting tools allows to identify the onset and prospects of the risk of crisis events and to form options for the development trends of enterprises and vectors of anti-crisis strategy in conditions of unpredictability of changes in the economic environment.

IMPROVEMENT OF ACCOUNTING ACCORDING TO NATIONAL STANDARDS AND METHODS OF INTERNAL CONTROL WITH THE PURPOSE OF COMPILING RELIABLE FINANCIAL REPORTING OF SMALL ENTERPRISES AND PREVENTING BANKRUPTCY

Purpose. The purpose of the research, the results of which are presented in this article, is to improve accounting according to national standards and internal control methods in order to prepare reliable financial reporting of small enterprises and prevent their bankruptcy. Method. During the performance of the work, general scientific methods (induction, deduction, abstraction, analysis, synthesis, modeling, analogy) and special research methods (inventory, observation, survey, verification of documents for form, essence and content, arithmetic verification, counter-verification, financial analysis). The results. The work improved the method of conducting internal control of the preparation of financial statements of a small enterprise, which includes an internal control test, a general plan for conducting internal control, an internal control program, and working documents of the internal controller. Forms of information on the formation of assets and liabilities of the Balance Sheet and the Report on the financial results of a small enterprise are also proposed, which are developed on the basis of accounting registers, namely information 1 m, 2 m, 3 m, 4 m and 5 m. Scientific novelty. Forms of documents on the formation of assets and liabilities of the Balance Sheet and the Report on the financial results of a small enterprise have been developed. The method of conducting internal control of the preparation of financial statements of a small enterprise has been improved. Practical significance. The proposed method of conducting internal control of the preparation of financial statements of a small enterprise will make it possible to cover all aspects of accounting according to national standards, will allow timely detection of violations in the accounting policy and prevent bankruptcy of the enterprise. The use of the proposed document templates for the formation of assets and liabilities of the Balance Sheet and the Report on the financial results of a small enterprise will help to reduce the time for data processing and the formation of financial statements, minimize the duration of accounting document preparation, and also prevent errors in the document flow and timely diagnose the probability of bankruptcy, which in turn will increase efficiency further activities of the enterprise.

Do firms led by founders take higher risk?

AbstractThis study examines whether firms led by founder‐CEOs are significantly different from firms led by nonfounder‐CEOs in terms of the nature of their risk. Our results show that founder‐led firms are associated with higher operational but lower financial risk. We find that the differential nature of risk‐taking in founder‐CEO firms is driven by CEO's influence, their propensity of removal, and the probability of bankruptcy of the firm. While CEO‐chair duality and the sensitivity of founder‐CEO firm's probable bankruptcy play significant roles in determining the level of financial risk, the sensitivity of founder‐CEOs to forced turnover leads to higher operational risk.