Bankruptcy Prediction: Application of Logit Analysis in Export Credit Risks

Abstract

To date, relatively little empirical research has been conducted on the efficacy of the trade credit risk prediction model in the context of international trade applications. Using a sample of listed firms in seven Asia-Pacific capital markets (Hong Kong Japan, Korea, Malaysia Singapore, Thailand, and the Philippines) from 2001 to 2003 with available data, we have made a preliminary attempt at empirically studying a predictive export credit risk model based on financial ratios, firm-specific characteristics (size, maturity, R&D expenses, and depreciation expenses), and country risk measures. The results show that our Logit models demonstrate decent classification accuracy and robustness. Specifically, the prediction ability is approximately equal to classification ability when the model is applied to a testing sample. Furthermore, the results indicate that the closer the analysis is to the credit crisis occurrence, the more improved the classification accuracy and prediction accuracy are.

Financial Distress of Local Government : A Study on Local Government Characteristics, Infrastructure, and Financial Condition

“…Previous study such as Barth, Cram, and Nelson (2001), Chi and Tang (2006), Gordon and Jordan (1989), Kahya (1997), Moore (1990) and Tinoco and Wilson (2013) on private sector shows that generally the information from financial report has an ability to predict financial distress. Plummer et al (2007) investigate use the government financial report provides relevant information to assess the risk of government failure.…”

Failure prediction from the investors’ view by using financial ratios. Lesson from Romania

“…Under an economic aspect, a failure can be defi ned through the company's fi nancial performance that can be represented by:  "Insuffi cient revenues to cover costs and where the average return on investment is below the fi rm's cost of capital" (Altman & Hotchkiss, 2006);  "negative equity and/or negative earnings" (Robu-Mironiuc, 2012;Tuvadaratragool, 2013);  "reductions in dividends, violations of debt covenants" (Tuvadaratragool, 2013);  "going private for a publicly listed company" which is similar to delisting the companies' shares (Christidis & Gregory, 2010;Ohlson,1980;Tuvadaratragool, 2013;Wang & Campbell, 2010). On the other hand, there are various studies which opt for "economic" interpretation when determining the two types of companies: bankrupt or non-bankrupt; as follows: Beaver (1966;2005), Christidis and Gregory (2010), Ohlson (1980), Robu-Mironiuc (2012), Tuvadaratragool (2013, Wang and Campbell (2010).…”

“…On the other hand, there are various studies which opt for "economic" interpretation when determining the two types of companies: bankrupt or non-bankrupt; as follows: Beaver (1966;2005), Christidis and Gregory (2010), Ohlson (1980), Robu-Mironiuc (2012), Tuvadaratragool (2013, Wang and Campbell (2010).…”

“…For developed countries, among the most important bankruptcy risk studies, we can mention: Beaver (1966), Altman (1968;2005;2006), Ohlson (1980), Shumway (2001) (for US), Christidis and Gregory (2010) (2014), Karas and Režňáková (2013;2014), Pitrova (2011) (Czech Republic); Elenkov and Fileva (2006) Suntraruk (2010; and Tuvadaratragool (2013) (Thailand); Lee W-C (2007) and Lee M-C (2014) (Taiwan).…”

“…There is though, another group of studies which analyse bankruptcy risks from an "economic" perspective according to which the companies were grouped into failing companies (represented by companies with low fi nancial and economic performance) and non-bankrupt companies (represented by companies that have different performance indicators considered to be high). An even fewer number of studies are focused (in the economic approach) on the investors' angle, according to which companies become bankrupt beginning with the delisting phase (Christidis & Gregory, 2010;Tuvadaratragool, 2013;Wang & Campbell, 2010).…”