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Dynamic analysis of the business failure process: A study of bankruptcy trajectories

Author

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  • du Jardin, Philippe
  • Séverin, Eric

Abstract

This study examines a method of analyzing the dynamics of financial failure. Using a large amount of data and a Kohonen map, we show how to depict company trajectories of behavior and movement to terminal failure We also show how to analyze these trajectories to describe and understand the dynamics of bankruptcy and how to use them as a diagnostic tool.

Suggested Citation

  • du Jardin, Philippe & Séverin, Eric, 2010. "Dynamic analysis of the business failure process: A study of bankruptcy trajectories," MPRA Paper 44379, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:44379
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    File URL: https://mpra.ub.uni-muenchen.de/44379/1/MPRA_paper_44379.pdf
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    References listed on IDEAS

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    1. Sueyoshi, Toshiyuki & Goto, Mika, 2009. "Methodological comparison between DEA (data envelopment analysis) and DEA-DA (discriminant analysis) from the perspective of bankruptcy assessment," European Journal of Operational Research, Elsevier, vol. 199(2), pages 561-575, December.
    2. Patrice Gaubert & Marie Cottrell, 1999. "A Dynamic Analysis Of Segmented Labor Market," Post-Print hal-00134147, HAL.
    3. Deakin, Eb, 1972. "Discriminant Analysis Of Predictors Of Business Failure," Journal of Accounting Research, Wiley Blackwell, vol. 10(1), pages 167-179.
    4. Patrice Gaubert & Marie Cottrell, 1999. "A Dynamic Analysis Of Segmented Labor Market," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00134147, HAL.
    5. Pompe, Paul P.M. & Bilderbeek, Jan, 2005. "The prediction of bankruptcy of small- and medium-sized industrial firms," Journal of Business Venturing, Elsevier, vol. 20(6), pages 847-868, November.
    6. Edward I. Altman, 1968. "Financial Ratios, Discriminant Analysis And The Prediction Of Corporate Bankruptcy," Journal of Finance, American Finance Association, vol. 23(4), pages 589-609, September.
    7. Laitinen, Erkki K. & Laitinen, Teija, 2000. "Bankruptcy prediction: Application of the Taylor's expansion in logistic regression," International Review of Financial Analysis, Elsevier, vol. 9(4), pages 327-349.
    8. Ohlson, Ja, 1980. "Financial Ratios And The Probabilistic Prediction Of Bankruptcy," Journal of Accounting Research, Wiley Blackwell, vol. 18(1), pages 109-131.
    9. H. Ooghe & S. De Prijcker, 2006. "Failure process and causes of company bankruptcy: a typology," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 06/388, Ghent University, Faculty of Economics and Business Administration.
    10. S. Balcaen & H. Ooghe, 2004. "35 years of studies on business failure: an overview of the classical statistical methodologiesand their related problems," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 04/248, Ghent University, Faculty of Economics and Business Administration.
    11. Altman, Edward I., 1984. "The success of business failure prediction models : An international survey," Journal of Banking & Finance, Elsevier, vol. 8(2), pages 171-198, June.
    12. Agarwal, Vineet & Taffler, Richard, 2008. "Comparing the performance of market-based and accounting-based bankruptcy prediction models," Journal of Banking & Finance, Elsevier, vol. 32(8), pages 1541-1551, August.
    13. Luoma, M & Laitinen, EK, 1991. "Survival analysis as a tool for company failure prediction," Omega, Elsevier, vol. 19(6), pages 673-678.
    14. Evi Neophytou & Cecilio Mar Molinero, 2004. "Predicting Corporate Failure in the UK: A Multidimensional Scaling Approach," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 31(5-6), pages 677-710.
    15. Gupta, Manak C, 1969. "The Effect of Size, Growth, and Industry on the Financial Structure of Manufacturing Companies," Journal of Finance, American Finance Association, vol. 24(3), pages 517-529, June.
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    Cited by:

    1. Błażej Prusak, 2018. "Review of Research into Enterprise Bankruptcy Prediction in Selected Central and Eastern European Countries," International Journal of Financial Studies, MDPI, Open Access Journal, vol. 6(3), pages 1-28, June.
    2. Lebret, Rémi & Iovleff, Serge & Langrognet, Florent & Biernacki, Christophe & Celeux, Gilles & Govaert, Gérard, 2015. "Rmixmod: The R Package of the Model-Based Unsupervised, Supervised, and Semi-Supervised Classification Mixmod Library," Journal of Statistical Software, Foundation for Open Access Statistics, vol. 67(i06).

    More about this item

    Keywords

    Company failure; Financial failure dynamics; Bankruptcy trajectories;

    JEL classification:

    • C45 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Neural Networks and Related Topics
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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