Is it Worth Comparing Different Bankruptcy Models?

Abstract

The aim of this paper is to compare the performance of small enterprises in the Zlín and Olomouc Regions. These enterprises were assessed using the Altman Z-Score model, the IN05 model, the Zmijewski model and the Springate model. The batch selected for this analysis included 16 enterprises from the Zlín Region and 16 enterprises from the Olomouc Region. Financial statements subjected to the analysis are from 2006 and 2010. The statistical data analysis was performed using the one-sample z-test for proportions and the paired t-test. The outcomes of the evaluation run using the Altman Z-Score model, the IN05 model and the Springate model revealed the enterprises to be fi nancially sound, but the Zmijewski model identifi ed them as being insolvent. The one-sample z-test for proportions confi rmed that at least 80% of these enterprises show a sound fi nancial condition. A comparison of all models has emphasized the substantial diff erence produced by the Zmijewski model. The paired t-test showed that the fi nancial performance of small enterprises had remained the same during the years involved. It is recommended that small enterprises assess their fi nancial performance using two diff erent bankruptcy models. They may wish to combine the Zmijewski model with any bankruptcy model (the Altman Z-Score model, the IN05 model or the Springate model) to ensure a proper method of analysis.

Review of Research into Enterprise Bankruptcy Prediction in Selected Central and Eastern European Countries

“…Research using both financial ratios and domestic and foreign models to assess the risk of bankruptcy of Czech companies from different sectors and of different sizes was conducted among others by: Klecka and Scholleova (2010); Divišová (2011);Pitrová (2011);Kubíčková (2011Kubíčková ( , 2015; Cámská (2012Cámská ( , 2013Cámská ( , 2016;Čámská and Hájek (2012); Šlégr (2013); Mičudová (2013aMičudová ( , 2013b; Kubecová and Vrchota (2014); Machek (2014); Rudolfova and Skerlíkova (2014); Dolejšová (2014Dolejšová ( , 2015; Hajdíková et al (2015); Daniela et al (2016). In addition, Kubíčková and Nulicek (2016) proposed potential indicators that act as predictors of enterprise bankruptcy under Czech conditions.…”

FDPM after the global price crisis in the coal industry

“…Lee et al (2014) findings are supported by Lundholm (1995). Dolejšová (2015) and Matturungan et al (2017) confirmed that the Altman and Springate models had 80% accuracy for predicting a company's financial status. This result was also supported by Syamni et al (2018).…”

“…These analytical tools have a high level of accuracy in predicting the potential bankruptcy of a company. Omelka et al (2013) compare the financial distress model then Chen et al (1995) and Dolejšová (2015) stated that to obtain appropriate results, it is best to use more than two prediction models. Lee et al (2014) tested the Ohlson model and found that it can forecast future stock price movement with greater accuracy than any other prediction method.…”

Family businesses and predictability of financial strength: a Hungarian study

“…When selecting the bankruptcy risk models, the aim was to consider only those which can be applied to family businesses and do not make restrictions concerning publicly quoted shares or the availability of market capitalization (see, for example, Scott, 1981;and Wu et al, 2010). According to the applicability of bankruptcy models to companies operating in smaller EU countries in latest years of the crisis, the highest relevance was found for the Altman Z-score and the IN05 Quick Test (see Bohdalová & Klempaiová, 2017;Dolejšová, 2015). This section details the method of using the models, or, in some cases, adapted for this study along with further information on the data sample.…”