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Logit model for predicting financial distress in Indian corporate sector

Author

Listed:
  • Gurmeet Singh
  • Ravi Singla

Abstract

Financial distress prediction is the interest area for many academicians and researchers as it adversely affects every economy and have important consequences for shareholders, creditors, investors, managers, employees and even government. The purpose of the study is to develop a model based on financial ratios by employing logistic regression to predict the likelihood of financial distress in Indian corporate sector. To validate the accuracy of the newly developed model two diagnostic tests viz. testing sample and receiver operating characteristic (ROC) curve are used. Both diagnostic tests validate that the newly developed financial distress prediction model achieved higher predictive power on testing sample, and area under the ROC curve of the developed model for testing sample is found to be 0.884 which indicates that model is good and has higher predictive power.

Suggested Citation

  • Gurmeet Singh & Ravi Singla, 2024. "Logit model for predicting financial distress in Indian corporate sector," International Journal of Business and Globalisation, Inderscience Enterprises Ltd, vol. 37(4), pages 516-534.
    • Handle: RePEc:ids:ijbglo:v:37:y:2024:i:4:p:516-534
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