Predicting Corporate Failure of Uk's Listed Companies
Author | : Mohammed Issah |
Publisher | : LAP Lambert Academic Publishing |
Total Pages | : 116 |
Release | : 2012-04 |
ISBN-10 | : 3848481847 |
ISBN-13 | : 9783848481842 |
Rating | : 4/5 (842 Downloads) |
Download or read book Predicting Corporate Failure of Uk's Listed Companies written by Mohammed Issah and published by LAP Lambert Academic Publishing. This book was released on 2012-04 with total page 116 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study compares two corporate failure prediction models, namely; multiple discriminant analysis (MDA) and logistic regression (Logit) in an attempt to; identify whether or not financial ratios can be used as indicators of failure in the UK, to identify financial ratios that are most important for detecting potential insolvency of UK s public listed companies and also which model is better in predicting corporate failure. The study employed financial information for a group of 50 distressed and 50 non-distressed UK listed companies during the period 2000 2010. The initial sample of 100 companies was divided into a 70% estimation (training) sample and a 30% holdout (test) sample for the following 4 data sets: First-year data set to predict failure, a second-year data set for a 2 year-ahead prediction, third-year data for a 3 year-ahead prediction, as well as cumulative three-year data to predict distress 1 year ahead by letting the ratios vary in time. For each company, a set of 19 financial ratios reflecting the company s profitability, solvency, asset utilisation, growth ability and size, were calculated and then used in the study.