<abstract xmlns="http://www.w3.org/1999/xhtml"><p>From the time of Altman and the first bankruptcy prediction models, the prediction of default of companies is in the centre of interest of many economists and scientists all over the world. For companies, early detection of the possible threat of imminent financial difficulties or even bankruptcy is a very important part of financial analysis. Over the last few years, many predictive models have been created in the world. However, it has been shown that these models are not very well transferable to the conditions of the economy of another country and their prediction or rating power in another country is lower. Therefore, it is best to create a specific predictive model in the country that takes into account the situation of companies on the basis of real data on their financial situation. This paper is focused on creating a model of failure prediction of small companies in Slovakia using a well-known and widely used method of multivariate discriminant analysis. Discriminant analysis is one of the oldest multivariate statistical methods and sometimes it is difficult to fulfil certain assumptions for data. However, its results are easily interpretable and can be used to classify a company to the group of companies with risk of financial difficulties or, on the contrary, between well-prosperous companies. Prediction model is created based on real data on Slovak enterprises and has a strong classification ability in the specific conditions of the Slovak Republic.</p></abstract>

From the time of Altman and the first bankruptcy prediction models, the prediction of default of companies is in the centre of interest of many economists and scientists all over the world. For companies, early detection of the possible threat of imminent financial difficulties or even bankruptcy is a very important part of financial analysis. Over the last few years, many predictive models have been created in the world. However, it has been shown that these models are not very well transferable to the conditions of the economy of another country and their prediction or rating power in another country is lower. Therefore, it is best to create a specific predictive model in the country that takes into account the situation of companies on the basis of real data on their financial situation. This paper is focused on creating a model of failure prediction of small companies in Slovakia using a well-known and widely used method of multivariate discriminant analysis. Discriminant analysis is one of the oldest multivariate statistical methods and sometimes it is difficult to fulfil certain assumptions for data. However, its results are easily interpretable and can be used to classify a company to the group of companies with risk of financial difficulties or, on the contrary, between well-prosperous companies. Prediction model is created based on real data on Slovak enterprises and has a strong classification ability in the specific conditions of the Slovak Republic.

Prediction of Default of Small Companies in the Slovak Republic

Department of Economics, Faculty of Operation and Economics of Transport and Communications

Economics and Culture

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

{"article-title":"Prediction of Default of Small Companies in the Slovak Republic"}

From the time of Altman and the first bankruptcy prediction models, the prediction of default of companies is in the centre of interest of many economists and...

Prediction of Default of Small Companies in the Slovak Republic

Published Online: Jul 20, 2018

Page range: 88 - 95

DOI: https://doi.org/10.2478/jec-2018-0010

Keywords
prediction of default, bankruptcy prediction models, financial distress, multivariate discriminant analysis

© 2018 Lucia Svabova et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Prediction of Default of Small Companies in the Slovak Republic

Published Online: Jul 20, 2018

Page range: 88 - 95

DOI: https://doi.org/10.2478/jec-2018-0010

Keywordsprediction of default, bankruptcy prediction models, financial distress, multivariate discriminant analysis

© 2018 Lucia Svabova et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Keywords
prediction of default, bankruptcy prediction models, financial distress, multivariate discriminant analysis