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Early warning models of financial distress. Case study of the Romanian firms listed on RASDAQ

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  • Mădălina Ecaterina ANDREICA

    (The Bucharest University of Economic Studies)

Abstract

In this paper we design an early warning model for Romanian distressed firms. The logit model was built based on financial ratios of 66 Romanian firms listed on RASDAQ that were facing financial difficulties in 2011. In addition, we identified the main principal components obtained with minimum loss of information after applying the principal component analysis and proposed a new estimation of the logit model by replacing the initial set of input data matrix with the main principal components of the financial observations. The results indicated an increase with 12 percentage points in the performance of the one year ahead prediction of financial distress of the new warning model.

Suggested Citation

  • Mădălina Ecaterina ANDREICA, 2013. "Early warning models of financial distress. Case study of the Romanian firms listed on RASDAQ," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(5(582)), pages 7-14, May.
    • Handle: RePEc:agr:journl:v:xx:y:2013:i:5(582):p:7-14
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    Cited by:

    1. Marin ANDREICA & Madalina Ecaterina POPESCU & Dragos MICU & Eugen ALBU, 2016. "Adaptive Management Procedural Model For Support Of Economic Organizations," Proceedings of the INTERNATIONAL MANAGEMENT CONFERENCE, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 10(1), pages 295-301, November.
    2. Mãdãlina Ecaterina POPESCU, 2015. "Proposal for a Decision Support System to Predict Financial Distress," REVISTA DE MANAGEMENT COMPARAT INTERNATIONAL/REVIEW OF INTERNATIONAL COMPARATIVE MANAGEMENT, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 16(1), pages 112-118, March.

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