Family businesses and predictability of financial strength: a Hungarian study

Abstract

The aim of this study is to examine how bankruptcy prediction models forecast financial strength for family businesses. Three predictive tests are used to study financial strength for three consecutive years (2016, 2017 and 2018) for a sample of 462,200 active Hungarian companies using the Amadeus database and expert data. Complex statistical model tests for credit assessment (bankruptcy predictions) are performed by size and ownership of the companies. It is found that the revised Altman model is impeded by a superfluous high weighting on net working capital; therefore, IN05 Quick Test predicted better chances for businesses in generating cash flows in a small emerging economy. By re-formulating the Bankruptcy Index of Karas and Režňáková and refining its coefficients, the modified Bankruptcy Index is more robust for predicting the financial health of family businesses on a cash flow basis. The test results of this modified Bankruptcy Index confirm the relative advance of family businesses in creating added value for owners. Practical implications arise from a management perspective: family businesses work better with predictability of survival in accordance with the model; therefore, their ability to adapt to financial constraints caused by crises is also more promising.

The role of COVID‐19 in worsening the debt sustainability in developing economies – The case of Ghana and Kenya

“…To put this in perspective, Altig et al (2020), in studying economic uncertainty concerning almost every aspect of the COVID-19 pandemic (implied stock market volatility, newspaper-based policy uncertainty, Twitter chatter about economic uncertainty, subjective uncertainty about business growth, forecaster disagreement about future GDP growth, and a model-based measure of macro uncertainty), noted the lack of close historic parallels of the economic impact of COVID-19 on countries and households. Sági et al (2020) cite the sudden decline in household purchasing power alongside their climbing indebtedness as a threat to the outlook of businesses. Considering the job losses and contraction in output (GDP) on a quarter-to-quarter basis in developed economies, Altig et al (2020) stresses the suddenness and enormity of the COVID-19 economic shock.…”

Управління Дебіторською Заборгованістю Та Фактори Впливу На Її Якість

“…Тлумачення фінансової стійкості в дослідженнях різноманітне. Окремі автори (Sági, & Lentner, 2020) формулюють поняття фінансової стійкості через досягнення підприємством необхідних фінансових параметрів; під стійким фінансовим станом підприємства вони розуміють ступінь забезпеченості підприємства необхідними для господарської діяльності фінансовими ресурсами та своєчасність здійснення грошових розрахунків за своїми боргами та зобов'язаннями. Так, вважається, що фінансовий стан підприємства стійкий, якщо підприємство досягає необхідних параметрів у напрямах рентабельності (прибутковості), наявності власних фінансових ресурсів, раціональному розміщенні коштів, ліквідності та платоспроможності (Sági, & Lentner, 2020;Dolgikh, Panfilova, & Smorodina, 2020).…”

Certain Issues of Green Bonds and Their Perception by Financial Markets, with Focus on Hungary

“…There is consensus in the literature that macroeconomic and institutional factors increase green bond issuance volumes (Tolliver et al, 2020). Governmental incentives, per se, are applicable to create a legal and institutional frame in which corporations may grow and prosper (Lentner, 2019), improve financially (Sági et al, 2020), and become socially more responsible (Migliorelli and Dessertine, 2019). Green bonds play an essential role in shifting capital to more sustainable economic activity (Maltais and Nykvist, 2020).…”