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The Prediction Model of Bankruptcy: Evidence from the Small and Medium Enterprises (SMEs) in Thailand

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  • Yossavadee Pugpaichit
  • Phassawan Suntrauk

Abstract

The study aims to develop the bankruptcy prediction model of Small and Medium Enterprises (SMEs) in form of company limited in Thailand during 2005-2010.Using logistic regression analysis and in-the-sample data,results show that the bankruptcy prediction model consists of a ratio of earnings after taxes to total assets and an asset turnover ratio. Since these two financial ratios represent profitability and asset utilization of firms, it is asserted that bankrupt firms are those who have relative low profitability due to their inefficient use of assets in generating profits continuously. By using out-of-sample data to examine the predictive ability of the estimated model, the results reveal that the estimated prediction model provides favorable results in which the percentages of accuracy of predicting bankrupt and non- bankrupt firms are 68% and 60%, respectively.

Suggested Citation

  • Yossavadee Pugpaichit & Phassawan Suntrauk, 2014. "The Prediction Model of Bankruptcy: Evidence from the Small and Medium Enterprises (SMEs) in Thailand," International Journal of Management Sciences, Research Academy of Social Sciences, vol. 3(10), pages 788-796.
    • Handle: RePEc:rss:jnljms:v3i10p4
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    References listed on IDEAS

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