Issue: 2017/Vol.27/No.3, Pages 81-97
THE EFFECTIVENESS OF DISCRIMINANT MODELS BASED ON THE EXAMPLE OF THE MANUFACTURING SECTOR
Sebastian Klaudiusz Tomczak
, Edward Radosiński
Cite as: S. K. Tomczak, E. Radosiński. The effectiveness of discriminant models based on the example of the manufacturing sector. Operations Research and Decisions 2017: 27(3), 81-97. DOI 10.5277/ord170306
Abstract
The best models of bankruptcy prediction have been selected that can indicate the deteriorating situation of a company several years before bankruptcy occurs. There are a lot of methods for evaluating the financial statements of enterprises, but only a few can assess a company as a whole and recognise sufficiently early the deteriorating financial standing of a business. The matrix method was used to classify companies in order to assess the models. The correctness of the classification made by the models was tested based on data covering a period of five years before the bankruptcy of enterprises. To analyse the effectiveness of these discriminant models, the financial reports of manufacturing companies were used. Analysis of 33 models of bankruptcy prediction shows that only 5 models were characterized by sufficient predictive ability in the five years before the bankruptcy of enterprises. The results obtained show that so far a unique, accurate, optimal model, by which companies could be assessed with very high efficiency, has not been identified. That is why it is vital to continue research related to the construction of models enabling accurate evaluation of the financial condition of businesses.
Keywords: insolvency, models of bankruptcy prediction, manufacturing sector
Received: 22 April 2017 Accepted: 18 October 2017