An Empirical Analysis of Financially Distressed Italian Companies

Abstract

This paper investigates the performance of forecasting models for default risk referring to the annual balance sheet information of Italian firms. One of the main issues in bankruptcy predictions is related to the selection of the best set of indicators. Therefore, our main research question concerns the identification of the determinants of corporate financial distress, comparing the performance of innovative selection techniques. Furthermore, several aspects related to the default risk analysis have been considered, namely the nature of the numerical information and the sample design. The proposed models take in consideration the above-mentioned issues and the empirical results, elaborated on a data set of financial indices expressly derived from annual reports of the industrial firms. These reports provide evidence in favor of our proposal over the traditional ones.

Working capital practices in select IT sector company, a study

“…Credit extension assists to foster sales and capture new customers with a godsend on profitability. However, allowing more credit to customers also begets risks as customers could experience funding constraints and bring slow-up or decrement in collections (Amendola et al, 2013;Sensini, 2016;Diaz;Vazquez, 2019). Thus, DTR serves as a pragmatic means of collectability of receivables and effectiveness with which credit policy of a business is enforced.…”

Exploring Corporate Bankruptcy in Belgian Private Firms

“…Agarwal & Taffler, 2008;Altman, 2000;Altman & Branch, 2015;Amendola, Restaino, & Sensini, 2011;Dimitras, Zanakis, & Zopoudinis, 1996;Jackson & Wood, 2013;Kim et al, 2016;Sensini, 2015Sensini, , 2016Wang et al, 2014). While most studies did not use a robust variable selection technique to identify the most relevant corporate bankruptcy predictors (Du Jardin, 2009), the backward stepwise procedure used in this study helps overcome this critical issue (Kim & Gu, 2006).…”

Financial Bankruptcy across European Countries

“…In particular, several previous studies indicate that, with various financial ratios, corporate bankruptcy can be predicted with success for at least five years before failure. The choice of the best predictors among the large number of financial indicators suitable for predicting firms" insolvency and bankruptcy has been guided by theoretical background, personal judgment, statistical methods and empirical findings obtained in previous studies (see, among others, Cultrera & Bauweraerts, 2017;Sensini, 2016;Sensini, 2015;Amendola et al, 2015;Jackson & Wood, 2013;Altman, 2000;Zmijewski, 1984). More specifically, the financial ratios considered in the analysis have been chosen on the basis of a few different criteria, that is they have a relevant financial meaning in a failure context, have been commonly used in failure predictions literature and also the information needed to calculate these ratios is available (Sensini, 2015).…”

“…Several theoretical and empirical studies have attempted to identify the best predictors among the large number of financial indicators suitable for predicting firms" insolvency and default (see, among others, Cultrera & Bauweraerts, 2017;Sensini, 2016;Sensini, 2015;Amendola et al, 2015;Jackson & Wood, 2013;Altman, 2000;Zmijewski, 1984). Sensini (2015), in particular, shows that the performance of default risk models in terms of forecast accuracy is mainly related to the selection of the best set of predictors.…”