Bankruptcy prediction models in the Serbian agricultural sector (original) (raw)
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Bankruptcy Risk Prediction in Ensuring the Sustainable Operation of Agriculture Companies
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In recent decades, predicting company bankruptcies and financial troubles has become a major concern for various stakeholders. Furthermore, because financially sustainable businesses are affected by numerous highly complex factors, both internal and external, the situation is even more complex. This paper applies Altman’s Z-score models; more precisely, the paper applies the initial Z-score model (a model for manufacturing companies), the Z′-score model (for companies operating in emerging markets), and the Z-score bankruptcy probability calculation. Therefore, this paper offers the results of the application of different Z-score models and the calculation of bankruptcy probability on a sample of agricultural companies listed on the Belgrade Stock Exchange in the period 2015–2019. In addition, different Z-score models are used for the same sample so that the difference between their results and application can be determined. In addition, the validity of the data published in the fin...
Industrija, 2011
Rezime: U radu su testirani originalni Altmanov Z-skor model, Z‟-skor model razvijen za kompanije koje nisu listirane na berzi i Z‟‟-skor model razvijen za trţišta u razvoju, na kompanijama koje reprezentuju srpsko trţište kapitala. Prognostiĉka moć Altmanovih modela za prognoziranje bankrotstva testirana je u periodu 2006-2009. na uzorku koji ĉine kompanije koje su ulazile u korpu Belex15 tokom septembra 2010. i Belexline, iskljuĉujući kompanije iz finansijskog sektora
Application of Sandin & Porporato's bankruptcy prediction model on Serbian companies
Industrija, 2011
Rezime: U radu su testirane odabrane srpske kompanije modelom koji su razvili Sandin i Porporato. Sandin i Porporato su imali nameru da testiraju pouzdanost racio analize za predikciju bankrotstva u ekonomijama u razvoju tokom stabilnog perioda, kao što je sluĉaj Argentine tokom 90-tih godina XX veka. Njihova namera je bila da razviju model dostupan investitorima u Argentinske kompanije, kao i kreditorima. Opredeljenje za primenu ovog modela posledica je ĉinjenice da je reĉ o modelu izraĊenom za ekonomije u razvoju, pri ĉemu, tvorci modela sugerišu da model moţe biti koristan za predikciju bankrotstva i u drugim ekonomijama u razvoju. Specifiĉnost modela sastoji se i u njegovoj jednostavnosti, budući da je komponovan od samo dve varjable. Kljuĉne reĉi: modeli za predikciju bankrotstva, racio analiza, Sandin-Poporato model, Beogradska berza Summary: We applied the models developed by Sandin and Porporato to a sample of Serbian companies. Sandin and Porporato purpose was to test the usefulness of ratio analysis to predict bankruptcy in a period of stability of an emerging economy, such as the case of Argentina in the 1990s with the aim to develop a classification method that is publicly available to all investors and creditors of Argentinean companies. Decision for usage of Sandin & Porporato"s model is result of the fact that the model was built specially for certain emerging market, where creators of the model suggest that the model can be used to predict business failure on the other emerging economies. Characteristic of the model can be seen in its simplicity, since it is composed of just two variables.
Journal of Business Economics and Management
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 rea...
PREDICTING BANKRUPTCY OF SELECTED FIRMS BY APPLYING ALTMAN'S Z-SCORE MODEL
Financial health is of great concern for a business firm. For measuring the financial health of a business firm, there are lots of techniques available. However, Altman's " Z-score " has been proven to be a reliable tool. This model envisages predicting the possibilities of bankruptcy of manufacturing organization. The " Z score " analysis has been adopted to monitor the financial health of the company. The current study has been conducted to assess the financial health of firms namely Hindustan Uniliver Ltd, Colgate Palmolive, Nestle, ITC and P&G. All the above companies are manufacturing firms. The research used secondary data from the financial reports of five manufacturing companies for a period of the five years from 2013 to 2017. The study reveals that none of the companies completely belongs to Safe Zone except for few years. Most of the firms are in Distress Zone which clearly indicates that these firms may go Bankrupt in near future. 1) Introduction The objective of all organizations is to create and increase shareholder value. All stake holders, including banks, financial institutions, regulatory bodies, the government, suppliers, customers, etc. want them to do well and be effectively and efficiently managed to prevent driving them to the brink of business failure/bankruptcy and then pushing them to failure, if mismanagement continues. To achieve profit maximization objective, firm needs strong internal & external support. Bankruptcy is a situation where the firm's total liabilities exceed total assets. The real net worth of the firm is, therefore negative. This leads to reduced sales, increased cost & losses, ineffective competition etc. Ultimately firm is under distress stage. Under such situations it becomes difficult for investors & lenders to analyze the financial performance of the organization. Several bankruptcy models for example, logit analysis, recursive portioning algorithm and neural networks are available but still Altman's model is considered to be superior and pervasively applied by researchers all over the world in the present days. Altman's Z-Score Model is the output of a credit-strength test that predicts company's likelihood of bankruptcy. 2) Literature Review Sanesh (2016) tried to assess the Altman Z-score of NIFTY 50 companies excluding banks and financial companies. The score tries to predict probability of default by the companies due to the financial distress based on the current financial statistics of the company. Kumari's (2013) paper tried to predict bankruptcy for MMTC based on Altman's model of the Z score. She concluded that the overall financial health of MMTC is good, and it can be quoted as an investor friendly company. Ramana Reddy and Hari Prasad Reddy (2013) is also relevant. In this article, the Z score analysis shows the poor financial performance leading to bankruptcy of Chittoor cooperative sugars Ltd. Comparatively the financial performance of Sri Venkateswara Sugars Factory Ltd. was good. Vikas Tyagi (2014) in his paper investigated the financial health of logistic industry in India based on Z score analysis. It reveals that Indian logistic industry was healthy industry .It is good that average Z score value increases from 2006 to 2010 (2.54 to 3.01) when Indian economy was hit by global recession. This indicates the overall performance of Indian logistic industry was good. Al-Rawi, Kiani and Vedd (2008) used the Altman z-score analysis to predict a firm's insolvency. They have remarked that the firm has increased its debt and face bankruptcy in the near future. Mizan and Hossain's (2014) study has been conducted to assess the financial health of cement industry of Bangladesh. The study revealed that among the five firms, two firms are financially sound as they have higher Z score than the benchmark (2.99). Another firm is in the grey area that is the firm is financially sound, but the management requires special attention to improve the financial health of the organization. The other two firms are at serious risk of financial crisis. Gerantonis Vergos and Christopoulos (2009) investigated whether Z-score models can predict bankruptcies for a period up to three years earlier. Results showed that Altman model performed well in predicting failures. They concluded that the results can be used by company management for financing decisions, by regulatory authorities and by portfolio managers in stock selection. Alkhatib and Al Bzour (2011) conducted a study to report the effect of financial ratios in bankruptcy prediction in Jordanian listed companies through the use of Altman and Kida models. They suggested that the Jordanian listed companies should at least apply one of these models with high credibility for predicting corporate bankruptcy. Among others, corporate bankruptcy prediction model developed by Altman in 1968 is the most accepted and widely used tool (Mizan, Amin and Rahman 2011).The Altman Z score model is used in different countries for predicting bankruptcy.
WSEAS TRANSACTIONS ON BUSINESS AND ECONOMICS, 2020
Bankruptcy is the conclusive affirmation of the inability of a company to support and endure current operations given its current financial position and debt obligations. If bankruptcy could be expected with affordable precision ahead of time, managers and investors of companies may have the possibility to take action to secure their companies, reduce risk and loss of business and perhaps even avoid bankruptcy itself. The aim of this paper is to test the suitability and predictive accuracy of the Altman Z-Score model in the Albanian manufacturing industry. After performing the empirical analysis, the conclusion is that this model clearly fails to effectively predict financial distress and bankruptcy and it isn't reliable in our case. Lastly, a logistic regression model is proposed, which is more adequate for the Albanian context.
Financial Compass for Slovak Enterprises: Modeling Economic Stability of Agricultural Entities
Journal of Risk and Financial Management, 2020
The risk of corporate financial distress negatively affects the operation of the enterprise itself and can change the financial performance of all other partners that come into close or wider contact. To identify these risks, business entities use early warning systems, prediction models, which help identify the level of corporate financial health. Despite the fact that the relevant financial analyses and financial health predictions are crucial to mitigate or eliminate the potential risks of bankruptcy, the modeling of financial health in emerging countries is mostly based on models which were developed in different economic sectors and countries. However, several prediction models have been introduced in emerging countries (also in Slovakia) in the last few years. Thus, the main purpose of the paper is to verify the predictive ability of the bankruptcy models formed in conditions of the Slovak economy in the sector of agriculture. To compare their predictive accuracy the confusion...
Journal on Processing and Energy in Agriculture, 2021
Contemporary market conditions make all business entities confront various risks – credit risk, liquidity risk, cash flow risk and market risk. Companies should predict these particular business risks and manage them adequately in order to minimize their influence. The assessment of creditworthiness and bankruptcy risk has a major role in the process of prediction and management of company risks. The creditworthiness of companies presents their ability to meet financial obligations to their creditors contemporary business conditions recognize several methods for assessment of credit ability of entities. One of the most commonly used models for credit ability valuation, as well as prediction of bankruptcy likelihood in a company is the Altman's Z-score model. The main scope of this article is the assessment of bankruptcy risk by using Altman's Z-score model for the group of companies from the agricultural branch of drying and storage of fruit.
Predictive Ability of Chosen Bankruptcy Models: A Case Study of Slovak Republic
Economics and Culture, 2018
Bankruptcy models are used to assess credit risk and predict financial situation to indicate the probable bankruptcy of the company. Contribution deals with the application of chosen bankruptcy models in analysing and predicting the financial health of selected companies. Most of the models have been developed abroad. In case of Slovak Republic, its application and correctness of the results can be problematic; therefore, we have focused primarily on those that have emerged in countries with a similar economy. We have calculated the selected prediction models in a sample of 500 Slovak enterprises. Predictive ability lower than 64% is considered as unfavourable. As part of the contribution, based on expert literature and relevant legislation, we have defined the criteria that allow to divide businesses into two groups: prosperous and non-prosperous. In the end, we compared the results of the selected models with the inclusion of enterprises in a prosperous and non- prosperous group b...