IDEAS home Printed from https://ideas.repec.org/a/pal/jorsoc/v68y2017i9d10.1057_s41274-016-0166-3.html
   My bibliography  Save this article

Integrating cognitive mapping and MCDA for bankruptcy prediction in small- and medium-sized enterprises

Author

Listed:
  • Manuel D. N. T. Oliveira

    (University Institute of Lisbon)

  • Fernando A. F. Ferreira

    (University Institute of Lisbon
    University of Memphis)

  • Guillermo O. Pérez-Bustamante Ilander

    (University of Oviedo)

  • Marjan S. Jalali

    (University Institute of Lisbon)

Abstract

The 2008 global financial crisis and its aftermath have shown the ability to predict bankruptcy to be a vital management skill and that the methodologies used for that purpose should be as close to reality as possible. This study aims to develop a multiple criteria system to predict bankruptcy in small- and medium-sized enterprises (SMEs). It combines cognitive mapping with the measuring attractiveness by a categorical based evaluation technique (MACBETH), resulting in a more complete and transparent process for evaluating SMEs and their risk of bankruptcy. What differentiates this framework is the fact that it is based on information obtained directly from managers and bank analysts who deal with this type of adversity on a daily basis. The results highlight the importance of financial and strategic aspects, among others, and demonstrate how cognitive mapping can improve the understanding of the decision situation at hand, while MACBETH facilitates the calculation of trade-offs among evaluation criteria.

Suggested Citation

  • Manuel D. N. T. Oliveira & Fernando A. F. Ferreira & Guillermo O. Pérez-Bustamante Ilander & Marjan S. Jalali, 2017. "Integrating cognitive mapping and MCDA for bankruptcy prediction in small- and medium-sized enterprises," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 68(9), pages 985-997, September.
    • Handle: RePEc:pal:jorsoc:v:68:y:2017:i:9:d:10.1057_s41274-016-0166-3
    DOI: 10.1057/s41274-016-0166-3
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1057/s41274-016-0166-3
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1057/s41274-016-0166-3?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Bana e Costa, Carlos A. & Nunes da Silva, Fernando & Vansnick, Jean-Claude, 2001. "Conflict dissolution in the public sector: A case-study," European Journal of Operational Research, Elsevier, vol. 130(2), pages 388-401, April.
    2. Doignon, Jean-Paul & Falmagne, Jean-Claude, 1984. "Matching relations and the dimensional structure of social choices," Mathematical Social Sciences, Elsevier, vol. 7(3), pages 211-229, June.
    3. Edward I. Altman, 1968. "The Prediction Of Corporate Bankruptcy: A Discriminant Analysis," Journal of Finance, American Finance Association, vol. 23(1), pages 193-194, March.
    4. Constantin Zopounidis & Emilios C. C Galariotis & Michael Doumpos & Stavroula Sarri & Kostas Andriosopoulos, 2015. "Multiple criteria decision aiding for finance: An updated bibliographic survey," Post-Print hal-02879842, HAL.
    5. F A F Ferreira & S P Santos & P M M Rodrigues, 2011. "Adding value to bank branch performance evaluation using cognitive maps and MCDA: a case study," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 62(7), pages 1320-1333, July.
    6. Beaver, Wh, 1966. "Financial Ratios As Predictors Of Failure - Reply," Journal of Accounting Research, Wiley Blackwell, vol. 4, pages 123-127.
    7. Howick, Susan & Ackermann, Fran, 2011. "Mixing OR methods in practice: Past, present and future directions," European Journal of Operational Research, Elsevier, vol. 215(3), pages 503-511, December.
    8. Marlene N M Filipe & Fernando A F Ferreira & Sérgio P Santos, 2015. "A multiple criteria information system for pedagogical evaluation and professional development of teachers," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 66(11), pages 1769-1782, November.
    9. Fernando A. F. Ferreira & Sérgio P. Santos & Paulo M. M. Rodrigues & Ronald W. Spahr, 2014. "Evaluating retail banking service quality and convenience with MCDA techniques: a case study at the bank branch level," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 15(1), pages 1-21, February.
    10. Everett, Jim & Watson, John, 1998. "Small Business Failure and External Risk Factors," Small Business Economics, Springer, vol. 11(4), pages 371-390, December.
    11. S P Santos & V Belton & S Howick, 2008. "Enhanced performance measurement using OR: a case study," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 59(6), pages 762-775, June.
    12. Zopounidis, Constantin & Doumpos, Michael, 2002. "Multicriteria classification and sorting methods: A literature review," European Journal of Operational Research, Elsevier, vol. 138(2), pages 229-246, April.
    13. Marjan S. Jalali & Fernando A. F. Ferreira & João J. M. Ferreira & Ieva Meidutė-Kavaliauskienė, 2016. "Integrating Metacognitive and Psychometric Decision-Making Approaches for Bank Customer Loyalty Measurement," International Journal of Information Technology & Decision Making (IJITDM), World Scientific Publishing Co. Pte. Ltd., vol. 15(04), pages 815-837, July.
    14. Lopez, Jose A. & Saidenberg, Marc R., 2000. "Evaluating credit risk models," Journal of Banking & Finance, Elsevier, vol. 24(1-2), pages 151-165, January.
    15. Peter C. Smith & Maria Goddard, 2008. "Performance Management and Operational Research: A Marriage Made in Heaven?," Palgrave Macmillan Books, in: Richard Thorpe & Jacky Holloway (ed.), Performance Management, chapter 9, pages 120-136, Palgrave Macmillan.
    16. Eden, Colin, 2004. "Analyzing cognitive maps to help structure issues or problems," European Journal of Operational Research, Elsevier, vol. 159(3), pages 673-686, December.
    17. JosÉ Figueira & Salvatore Greco & Matthias Ehrogott, 2005. "Multiple Criteria Decision Analysis: State of the Art Surveys," International Series in Operations Research and Management Science, Springer, number 978-0-387-23081-8, September.
    18. S Bell & S Morse, 2013. "Groups and facilitators within problem structuring processes," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 64(7), pages 959-972, July.
    19. Fernando A. F. Ferreira & Sérgio P. Santos & Paulo M. M. Rodrigues & Ronald W. Spahr, 2014. "How to create indices for bank branch financial performance measurement using MCDA techniques: an illustrative example," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 15(4), pages 708-728, September.
    20. Beaver, Wh, 1966. "Financial Ratios As Predictors Of Failure," Journal of Accounting Research, Wiley Blackwell, vol. 4, pages 71-111.
    21. Edward I. Altman, 1968. "Financial Ratios, Discriminant Analysis And The Prediction Of Corporate Bankruptcy," Journal of Finance, American Finance Association, vol. 23(4), pages 589-609, September.
    22. Edward I. Altman & Gabriele Sabato, 2013. "MODELING CREDIT RISK FOR SMEs: EVIDENCE FROM THE US MARKET," World Scientific Book Chapters, in: Oliviero Roggi & Edward I Altman (ed.), Managing and Measuring Risk Emerging Global Standards and Regulations After the Financial Crisis, chapter 9, pages 251-279, World Scientific Publishing Co. Pte. Ltd..
    23. Bana e Costa, Carlos A. & Chagas, Manuel P., 2004. "A career choice problem: An example of how to use MACBETH to build a quantitative value model based on qualitative value judgments," European Journal of Operational Research, Elsevier, vol. 153(2), pages 323-331, March.
    24. Ohlson, Ja, 1980. "Financial Ratios And The Probabilistic Prediction Of Bankruptcy," Journal of Accounting Research, Wiley Blackwell, vol. 18(1), pages 109-131.
    25. Zmijewski, Me, 1984. "Methodological Issues Related To The Estimation Of Financial Distress Prediction Models," Journal of Accounting Research, Wiley Blackwell, vol. 22, pages 59-82.
    26. Mingers, John & Rosenhead, Jonathan, 2004. "Problem structuring methods in action," European Journal of Operational Research, Elsevier, vol. 152(3), pages 530-554, February.
    27. du Jardin, Philippe, 2015. "Bankruptcy prediction using terminal failure processes," European Journal of Operational Research, Elsevier, vol. 242(1), pages 286-303.
    28. Carlos A. Bana e Costa & João C. Lourenço & Manuel P. Chagas & João C. Bana e Costa, 2008. "Development of Reusable Bid Evaluation Models for the Portuguese Electric Transmission Company," Decision Analysis, INFORMS, vol. 5(1), pages 22-42, March.
    29. Tegarden, David P. & Sheetz, Steven D., 2003. "Group cognitive mapping: a methodology and system for capturing and evaluating managerial and organizational cognition," Omega, Elsevier, vol. 31(2), pages 113-125, April.
    30. Carlos A. Bana e Costa & Jean-Marie De Corte & Jean-Claude Vansnick, 2016. "On the Mathematical Foundations of MACBETH," International Series in Operations Research & Management Science, in: Salvatore Greco & Matthias Ehrgott & José Rui Figueira (ed.), Multiple Criteria Decision Analysis, edition 2, chapter 0, pages 421-463, Springer.
    31. Frydman, Halina & Altman, Edward I & Kao, Duen-Li, 1985. "Introducing Recursive Partitioning for Financial Classification: The Case of Financial Distress," Journal of Finance, American Finance Association, vol. 40(1), pages 269-291, March.
    32. Constantin Zopounidis & Emilios Galariotis & Michael Doumpos & Stavroula Sarri & Kostas Andriosopoulos, 2015. "Multiple criteria decision aiding for finance: An updated bibliographic survey," Post-Print hal-01183389, HAL.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Büşra Alma Çallı & Erman Coşkun, 2021. "A Longitudinal Systematic Review of Credit Risk Assessment and Credit Default Predictors," SAGE Open, , vol. 11(4), pages 21582440211, November.
    2. Yu Zhao & Huaming Du & Qing Li & Fuzhen Zhuang & Ji Liu & Gang Kou, 2022. "A Comprehensive Survey on Enterprise Financial Risk Analysis from Big Data Perspective," Papers 2211.14997, arXiv.org, revised May 2023.
    3. Francesco Ciampi & Alessandro Giannozzi & Giacomo Marzi & Edward I. Altman, 2021. "Rethinking SME default prediction: a systematic literature review and future perspectives," Scientometrics, Springer;Akadémiai Kiadó, vol. 126(3), pages 2141-2188, March.
    4. Meng-Meng Tan & Dong-Ling Xu & Jian-Bo Yang, 2022. "Corporate Failure Risk Assessment for Knowledge-Intensive Services Using the Evidential Reasoning Approach," JRFM, MDPI, vol. 15(3), pages 1-29, March.
    5. Fernando A. F. Ferreira & Ieva Meidutė-Kavaliauskienė & Edmundas K. Zavadskas & Marjan S. Jalali & Sandra M. J. Catarino, 2019. "A Judgment-Based Risk Assessment Framework for Consumer Loans," International Journal of Information Technology & Decision Making (IJITDM), World Scientific Publishing Co. Pte. Ltd., vol. 18(01), pages 7-33, January.
    6. Carmen Gallucci & Rosalia Santullli & Michele Modina & Vincenzo Formisano, 2023. "Financial ratios, corporate governance and bank-firm information: a Bayesian approach to predict SMEs’ default," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 27(3), pages 873-892, September.
    7. Lisa Crosato & Caterina Liberati & Marco Repetto, 2021. "Look Who's Talking: Interpretable Machine Learning for Assessing Italian SMEs Credit Default," Papers 2108.13914, arXiv.org, revised Sep 2021.
    8. Francisco C. Marques & Fernando A. F. Ferreira & Constantin Zopounidis & Audrius Banaitis, 2022. "A system dynamics-based approach to determinants of family business growth," Annals of Operations Research, Springer, vol. 311(2), pages 799-819, April.
    9. Maria A. S. Xavier & Fernando A. F. Ferreira & José P. Esperança, 2021. "An intuition-based evaluation framework for social credit applications," Annals of Operations Research, Springer, vol. 296(1), pages 571-590, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Fernando A. F. Ferreira & Sérgio P. Santos, 2021. "Two decades on the MACBETH approach: a bibliometric analysis," Annals of Operations Research, Springer, vol. 296(1), pages 901-925, January.
    2. Fernando A. F. Ferreira & Ieva Meidutė-Kavaliauskienė & Edmundas K. Zavadskas & Marjan S. Jalali & Sandra M. J. Catarino, 2019. "A Judgment-Based Risk Assessment Framework for Consumer Loans," International Journal of Information Technology & Decision Making (IJITDM), World Scientific Publishing Co. Pte. Ltd., vol. 18(01), pages 7-33, January.
    3. Carayannis, Elias G. & Ferreira, Fernando A.F. & Bento, Paulo & Ferreira, João J.M. & Jalali, Marjan S. & Fernandes, Bernardo M.Q., 2018. "Developing a socio-technical evaluation index for tourist destination competitiveness using cognitive mapping and MCDA," Technological Forecasting and Social Change, Elsevier, vol. 131(C), pages 147-158.
    4. Serrano-Cinca, Carlos & Gutiérrez-Nieto, Begoña & Bernate-Valbuena, Martha, 2019. "The use of accounting anomalies indicators to predict business failure," European Management Journal, Elsevier, vol. 37(3), pages 353-375.
    5. Fernando García & Francisco Guijarro & Ismael Moya, 2013. "Monitoring credit risk in the social economy sector by means of a binary goal programming model," Service Business, Springer;Pan-Pacific Business Association, vol. 7(3), pages 483-495, September.
    6. Xavier Brédart & Eric Séverin & David Veganzones, 2021. "Human resources and corporate failure prediction modeling: Evidence from Belgium," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 40(7), pages 1325-1341, November.
    7. Ben Jabeur, Sami, 2017. "Bankruptcy prediction using Partial Least Squares Logistic Regression," Journal of Retailing and Consumer Services, Elsevier, vol. 36(C), pages 197-202.
    8. Şaban Çelik, 2013. "Micro Credit Risk Metrics: A Comprehensive Review," Intelligent Systems in Accounting, Finance and Management, John Wiley & Sons, Ltd., vol. 20(4), pages 233-272, October.
    9. Maria A. S. Xavier & Fernando A. F. Ferreira & José P. Esperança, 2021. "An intuition-based evaluation framework for social credit applications," Annals of Operations Research, Springer, vol. 296(1), pages 571-590, January.
    10. Francesco Ciampi & Valentina Cillo & Fabio Fiano, 2020. "Combining Kohonen maps and prior payment behavior for small enterprise default prediction," Small Business Economics, Springer, vol. 54(4), pages 1007-1039, April.
    11. Santos, Sérgio P. & Belton, Valerie & Howick, Susan & Pilkington, Martin, 2018. "Measuring organisational performance using a mix of OR methods," Technological Forecasting and Social Change, Elsevier, vol. 131(C), pages 18-30.
    12. Mohammad Mahdi Mousavi & Jamal Ouenniche, 2018. "Multi-criteria ranking of corporate distress prediction models: empirical evaluation and methodological contributions," Annals of Operations Research, Springer, vol. 271(2), pages 853-886, December.
    13. Mohammad Mahdi Mousavi & Jamal Ouenniche & Kaoru Tone, 2023. "A dynamic performance evaluation of distress prediction models," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 42(4), pages 756-784, July.
    14. fernández, María t. Tascón & gutiérrez, Francisco J. Castaño, 2012. "Variables y Modelos Para La Identificación y Predicción Del Fracaso Empresarial: Revisión de La Investigación Empírica Reciente," Revista de Contabilidad - Spanish Accounting Review, Elsevier, vol. 15(1), pages 7-58.
    15. Zeineb Affes & Rania Hentati-Kaffel, 2019. "Forecast bankruptcy using a blend of clustering and MARS model: case of US banks," Annals of Operations Research, Springer, vol. 281(1), pages 27-64, October.
    16. Matthew Smith & Francisco Alvarez, 2022. "Predicting Firm-Level Bankruptcy in the Spanish Economy Using Extreme Gradient Boosting," Computational Economics, Springer;Society for Computational Economics, vol. 59(1), pages 263-295, January.
    17. Ashraf, Sumaira & Félix, Elisabete G.S. & Serrasqueiro, Zélia, 2020. "Development and testing of an augmented distress prediction model: A comparative study on a developed and an emerging market," Journal of Multinational Financial Management, Elsevier, vol. 57.
    18. Julia A. Tarasova & Ekaterina S. Fevraleva, 2021. "Forecasting of Bankruptcy: Evidence from Insurance Companies in Russia," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 4, pages 75-90, August.
    19. Evangelos C. Charalambakis & Ian Garrett, 2019. "On corporate financial distress prediction: What can we learn from private firms in a developing economy? Evidence from Greece," Review of Quantitative Finance and Accounting, Springer, vol. 52(2), pages 467-491, February.
    20. William H. Beaver & Stefano Cascino & Maria Correia & Maureen F. McNichols, 2019. "Group Affiliation and Default Prediction," Management Science, INFORMS, vol. 65(8), pages 3559-3584, August.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:jorsoc:v:68:y:2017:i:9:d:10.1057_s41274-016-0166-3. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave-journals.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.