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Bankruptcy Prediction Model for Private Limited Companies of Lithuania

Author

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  • Šlefendorfas Gediminas

    (Faculty of Economics, Vilnius University, Sauletekio al. 9 (building II), LT-10222,Vilnius, Lithuania)

Abstract

The paper is mainly devoted to the bankruptcy prediction models and their ability to assess a bankruptcy probability for Lithuanian companies. The study showed that the most common type of companies in Lithuania is a private limited company, therefore, the main objective was to analyse such companies’ financial information and by using these results, create a new bankruptcy prediction model, which would allow to predict the bankruptcy probability as accurately as possible. 145 companies (73 already bankrupt and 72 still operating) were chosen as a primary sample and by using multivariate discriminant analysis stepwise method a linear function ZGS has been created. To achieve that, 156 different financial ratios were selected as a primary input data by using correlation calculation between bankruptcy and still operating companies and Mann - Whitney U test techniques. The results showed that 89% of companies were classified correctly, which states that the model is strong enough to predict bankruptcy probability for private limited companies operating in Lithuania in a sufficient accuracy.

Suggested Citation

  • Šlefendorfas Gediminas, 2016. "Bankruptcy Prediction Model for Private Limited Companies of Lithuania," Ekonomika (Economics), Sciendo, vol. 95(1), pages 134-152, January.
    • Handle: RePEc:vrs:ekonom:v:95:y:2016:i:1:p:134-152:n:7
    DOI: 10.15388/ekon.2016.1.9910
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    References listed on IDEAS

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    6. du Jardin, Philippe, 2009. "Bankruptcy prediction models: How to choose the most relevant variables?," MPRA Paper 44380, University Library of Munich, Germany.
    7. Abdul RASHID & Qaiser ABBAS, 2011. "Predicting Bankruptcy in Pakistan," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(9(562)), pages 103-128, September.
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    Cited by:

    1. Błażej Prusak, 2018. "Review of Research into Enterprise Bankruptcy Prediction in Selected Central and Eastern European Countries," IJFS, MDPI, vol. 6(3), pages 1-28, June.
    2. Daniel Ogachi & Richard Ndege & Peter Gaturu & Zeman Zoltan, 2020. "Corporate Bankruptcy Prediction Model, a Special Focus on Listed Companies in Kenya," JRFM, MDPI, vol. 13(3), pages 1-14, March.

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