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Complex issue regarding the bankruptcy risk by using the scoring method

Author

Listed:
  • Caruntu Constantin
  • Lapadusi Mihaela Loredana

    („Constantin Brâncusi” University, Faculty of Economic Science and Affairs Administration)

Abstract

The goal of the scoring method is to provide predictive models for the assessment of the bankruptcy risk of an enterprise. Its implementation requires observing a set on enterprises from two different groups: a group of companies with financial difficulties and a group of enterprises with no financial problems. For each of the two groups is established a set of rates, and then is determined the best linear combination of rates which allows the differentiation between the two groups of companies. The scoring method refers to profitability indicators, indicators of asset structure, liquidity indicators or efficiency indicators. The condition for selecting the indicators which show the company’s performance is the independent relation between them. The existence of correlations between indicators would lead, during that function, to record the repeated influences of the same economic or financial phenomenon.

Suggested Citation

  • Caruntu Constantin & Lapadusi Mihaela Loredana, 2010. "Complex issue regarding the bankruptcy risk by using the scoring method," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(1), pages 1483-1488, May.
    • Handle: RePEc:ovi:oviste:v:10:y:2010:i:1:p:1483-1488
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    More about this item

    Keywords

    risk; efficiency; Z score; financial results;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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