tailieunhanh - Predictive ability of accounting ratio for bankruptcy

Among the most controversial issues in the literature, and empirical studies that have addressed the subject of bankruptcy prediction, there is certainly the understanding of what kind of indicators is most predictive in the report on time, and especially with fewer errors thorough a corporate crisis. In this regard, the present work contributes to the already vast literature that analyzes the determinants of the probability of firm default, with particular attention to the quantities contained in the accounting ratios. With the support of 9,390 Italian SMEs will occur the specific contribution of each ratio within each rating category considering, therefore, the predictive value of each explanatory variable. This survey’s results can even prove the predictive ability of capital structure and debt coverage compared to the minor validity of some indicators of turnover, profitability, and cash conversion cycle. | Journal of Applied Finance Banking vol. 5 no. 1 2015 19-33 ISSN 1792-6580 print version 1792-6599 online Scienpress Ltd 2015 Predictive Ability of Accounting Ratio for Bankruptcy Marco Muscettola1 Abstract Among the most controversial issues in the literature and empirical studies that have addressed the subject of bankruptcy prediction there is certainly the understanding of what kind of indicators is most predictive in the report on time and especially with fewer errors thorough a corporate crisis. In this regard the present work contributes to the already vast literature that analyzes the determinants of the probability of firm default with particular attention to the quantities contained in the accounting ratios. With the support of 9 390 Italian SMEs will occur the specific contribution of each ratio within each rating category considering therefore the predictive value of each explanatory variable. This survey s results can even prove the predictive ability of capital structure and debt coverage compared to the minor validity of some indicators of turnover profitability and cash conversion cycle. JEL classification numbers C13 C51 C53 G33 Keywords Credit Rating SME finance Default risk estimation model accuracy accounting ratio Discriminatory power 1 Introduction The first aim of this study is to develop an empirical application of credit risk modelling for privately held corporate firms. The second main objective is to display what is the specific contribution of each explanatory variable in the model of bankruptcy prediction. In recent decades many techniques occurred and many studies have been addressed by scholars throughout the world to clarify the most diverse aspects on the prediction of firms insolvencies. These models despite their specificity have in common the ability to select a subset of indicators that distinguish firms that become insolvent by healthy firms. So regardless of the different methods used over time it is possible to summarize this