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Predictive potential and risks of selected bankruptcy prediction models in the Slovak business environment

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  • Beata Gavurova
  • Miroslava Packova
  • Maria Misankova
  • Lubos Smrcka

Abstract

In our study, we focused on the assessment of four bankruptcy prediction models, to figure out which model is most appropriate in the conditions of the Slovak business environment. Based on the previous research within the Slovak conditions, we set a portfolio of 4 models to be assessed: Altman model (1984), Ohlson model (1980), indexes IN01 and IN05 that were validated on the sample of 700 Slovak companies. Based on previous studies we expected that IN indexes are superior to Ohlson and Altman model. The excellency of our research lies in validation and assessing the accuracy of bankruptcy prediction models at three levels: the overall accuracy, accuracy of the bankruptcy prediction, and the non-bankruptcy prediction accuracy. This analytical structure enables to look at the topic more complexly and to increase the objectification of accuracy of analysed models. Based on the results, we showed that Ohlson model is not applicable to predict bankruptcy in the Slovak conditions as reached the lowest bankruptcy prediction ability even if has high non bankruptcy prediction ability. On the other hand, we have confirmed our expectation about the bankruptcy prediction ability of index IN05, that is proven to be superior to Ohlson and Altman model and so is the most appropriate model for Slovak business environment.

Suggested Citation

  • Beata Gavurova & Miroslava Packova & Maria Misankova & Lubos Smrcka, 2017. "Predictive potential and risks of selected bankruptcy prediction models in the Slovak business environment," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 18(6), pages 1156-1173, November.
    • Handle: RePEc:taf:jbemgt:v:18:y:2017:i:6:p:1156-1173
    DOI: 10.3846/16111699.2017.1400461
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    1. G. Lanine & R. Vander Vennet, 2005. "Failure prediction in the Russian bank sector with logit and trait recognition models," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 05/329, Ghent University, Faculty of Economics and Business Administration.
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    2. Md Jahidur Rahman & Hongtao Zhu, 2023. "Predicting accounting fraud using imbalanced ensemble learning classifiers – evidence from China," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(3), pages 3455-3486, September.
    3. Elena Gregova & Katarina Valaskova & Peter Adamko & Milos Tumpach & Jaroslav Jaros, 2020. "Predicting Financial Distress of Slovak Enterprises: Comparison of Selected Traditional and Learning Algorithms Methods," Sustainability, MDPI, vol. 12(10), pages 1-17, May.
    4. Marek Vochozka & Jaromir Vrbka & Petr Suler, 2020. "Bankruptcy or Success? The Effective Prediction of a Company’s Financial Development Using LSTM," Sustainability, MDPI, vol. 12(18), pages 1-17, September.
    5. Rafal Siedlecki & Pawel Predkiewicz & Agnieszka Bem & Aleksandra Szpulak, 2021. "Working Capital Management in Hospitals: Evidence from Poland," European Research Studies Journal, European Research Studies Journal, vol. 0(Special 1), pages 836-850.
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    7. Josep Patau & Antonio Somoza & Salvador Torra, 2020. "Diagnosis of the Domino Effect in Bankruptcy Situations Through Positioning Maps and Their Evolution 10 Years Later," SAGE Open, , vol. 10(4), pages 21582440209, December.
    8. Andrzej Jaki & Wojciech Ćwięk, 2020. "Bankruptcy Prediction Models Based on Value Measures," JRFM, MDPI, vol. 14(1), pages 1-14, December.
    9. Zuzana Virglerova, 2018. "Differences In The Concept Of Risk Management In V4 Countries," International Journal of Entrepreneurial Knowledge, Center for International Scientific Research of VSO and VSPP, vol. 6(2), pages 100-109, December.
    10. Jarosław Kaczmarek & Konrad Kolegowicz & Wojciech Szymla, 2022. "Restructuring of the Coal Mining Industry and the Challenges of Energy Transition in Poland (1990–2020)," Energies, MDPI, vol. 15(10), pages 1-48, May.
    11. Tomáš Krulický & Veronika Machová & Ondřej Dvorák, 2022. "Actual paid cost of equity in construction," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 10(1), pages 408-419, September.
    12. Aleksandr Kljuènikov & Mehmet Civelek & Cyril Klimeš & Radim Farana, 2022. "Export risk perceptions of SMEs in selected Visegrad countries," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 17(1), pages 173-190, March.
    13. Katarina Valaskova & George Lazaroiu & Judit Olah & Anna Siekelova & Barbora Lancova, 2019. "How Capital Structure Affects Business Valuation: A Case Study of Slovakia," Central European Business Review, Prague University of Economics and Business, vol. 2019(3), pages 1-17.

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