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Practical application of the CCB model in Czechia

Author

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  • Vitezslav Halek

    (University of Hradec Kralove, Faculty of Informatics and Management, 500 03 Hradec Kralove, Czechia)

Abstract

This research aimed to present a new bankruptcy prediction model and apply this original prediction method in practice. The Come Clean Bankruptcy (or CCB) model uses relevant financial indicators and ratios to detect the signs of impending financial distress in time so that the management can take appropriate measures to avoid it. The model was applied to the data reported by 199 entities operating in the textile/clothing industry in the Czech Republic. Analyzing data reported for the previous seven years enabled us to predict which companies are more likely to end in a difficult financial situation. Afterward, comparing these predictions with the actual development of those companies in 2013-2020 serves to verify the efficacy and usability of the model to corporate reality. The research has shown that companies that went bankrupt in the analyzed period represented only a fraction of the data set (roughly 4.5%). Despite the small number of financial failures occurring during the analyzed period, the CCB model could detect impending bankruptcy in one-third of the cases.

Suggested Citation

  • Vitezslav Halek, 2021. "Practical application of the CCB model in Czechia," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 39(2), pages 299-323.
    • Handle: RePEc:rfe:zbefri:v:39:y:2021:i:2:p:299-323
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    References listed on IDEAS

    as
    1. Arvind Shrivastava & Kuldeep Kumar & Nitin Kumar, 2018. "Business Distress Prediction Using Bayesian Logistic Model for Indian Firms," Risks, MDPI, vol. 6(4), pages 1-15, October.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Bankruptcy model; predicting risks; financial distress; Czech Republic;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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