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The Using Factor Analysis Method In Prediction Of Business Failure

Author

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  • Mary Violeta Petrescu

    (University of Craiova Faculty of Economics and Business Administration)

Abstract

After the great financial crisis of 2008 many companies all over the world was facing with bankruptcy or insolvency, because it were not able to face to the all challenges and the unexpected changes in the economy. Literature review and study demonstrated that the prediction of the risk of bankruptcy of firms is imperative. However, the lack of a comprehensive theory of business failure has led to the selection of a variety of financial variables in insolvency prediction. Most researchers started with a large set of variables and then applied different statistical techniques or stepwise procedures in order to reduce the number of predictors. This study highlights the utility of factor analysis in prediction of business failure.

Suggested Citation

  • Mary Violeta Petrescu, 2015. "The Using Factor Analysis Method In Prediction Of Business Failure," Annals of University of Craiova - Economic Sciences Series, University of Craiova, Faculty of Economics and Business Administration, vol. 1(43), pages 282-288.
    • Handle: RePEc:aio:aucsse:v:1:y:2015:i:43:p:282-288
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    More about this item

    Keywords

    business; company; Factor Analysis; failure; Principal Components Analysis;
    All these keywords.

    JEL classification:

    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis
    • G01 - Financial Economics - - General - - - Financial Crises

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