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Using financial ratios to identify Romanian distressed companies

Author

Listed:
  • ANDREICA Madalina Ecaterina

    () (The Bucharest Academy of Economic Studies, Romania)

  • ANDREICA Mugurel Ionut

    () (Politehnica University, Bucharest, Romania)

  • ANDREICA Marin

    () (The Bucharest Academy of Economic Studies, Romania)

Abstract

In the context of the current financial crisis, when more companies are facing bankruptcy or insolvency, the paper aims to find methods to identify distressed firms by using financial ratios. The study will focus on identifying a group of Romanian listed companies, for which financial data for the year 2008 were available. For each company a set of 14 financial indicators was calculated and then used in a principal component analysis, followed by a cluster analysis, a logit model, and a CHAID classification tree.

Suggested Citation

  • ANDREICA Madalina Ecaterina & ANDREICA Mugurel Ionut & ANDREICA Marin, 2009. "Using financial ratios to identify Romanian distressed companies," Economia. Seria Management, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 12(1 Special), pages 46-55, July.
  • Handle: RePEc:rom:econmn:v:12:y:2009:i:1special:p:46-55
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    References listed on IDEAS

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    1. repec:bla:joares:v:4:y:1966:i::p:71-111 is not listed on IDEAS
    2. Scott, James, 1981. "The probability of bankruptcy: A comparison of empirical predictions and theoretical models," Journal of Banking & Finance, Elsevier, vol. 5(3), pages 317-344, September.
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    4. repec:bla:joares:v:22:y:1984:i::p:59-82 is not listed on IDEAS
    5. Eisenbeis, Robert A, 1977. "Pitfalls in the Application of Discriminant Analysis in Business, Finance, and Economics," Journal of Finance, American Finance Association, vol. 32(3), pages 875-900, June.
    6. Shumway, Tyler, 2001. "Forecasting Bankruptcy More Accurately: A Simple Hazard Model," The Journal of Business, University of Chicago Press, vol. 74(1), pages 101-124, January.
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    Cited by:

    1. repec:bec:imsber:v:9:y:2017:i:4:p:259-286 is not listed on IDEAS

    More about this item

    Keywords

    distress company; financial ratio; cluster; CHAID; logit model;

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • C40 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - General
    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General

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