Comparative analysis between statistical and artificial intelligence models in business failure prediction

A growing number of predicting corporate failure models has emerged since 60s. Economic and social consequences of business failure can be dramatic, thus it is not surprise that the issue has been of growing interest in academic research as well as in business context. The main purpose of this study is to compare the predictive ability of five developed models based on three statistical techniques (Discriminant Analysis, Logit and Probit) and two models based on Artificial Intelligence (Neural Networks and Rough Sets). The five models were employed to a dataset of 420 non-bankrupt firms and 125 bankrupt firms belonging to the textile and clothing industry, over the period 2003–09. Results show that all the models performed well, with an overall correct classification level higher than 90%, and a type II error always less than 2%. The type I error increases as we move away from the year prior to failure. Our models contribute to the discussion of corporate financial distress causes. Moreover it can be used to assist decisions of creditors, investors and auditors. Additionally, this research can be of great contribution to devisers of national economic policies that aim to reduce industrial unemployment.

Comparative Analysis between Statistical and Artificial Intelligence Models in Business Failure Prediction

A growing number of predicting corporate failure models has emerged since 60s. Economic and social consequences of business failure can be dramatic, thus it is not surprise that the issue has been of growing interest in academic research as well as in business context. The main purpose of this study is to compare the predictive ability of five developed models based on three statistical techniques (Discriminant Analysis, Logit and Probit) and two models based on Artificial Intelligence (Neural Networks and Rough Sets). The five models were employed to a dataset of 420 non-bankrupt firms and 125 bankrupt firms belonging to the textile and clothing industry, over the period 2003–09. Results show that all the models performed well, with an overall correct classification level higher than 90%, and a type II error always less than 2%. The type I error increases as we move away from the year prior to failure. Our models contribute to the discussion of corporate financial distress causes. Moreover it can be used to assist decisions of creditors, investors and auditors. Additionally, this research can be of great contribution to devisers of national economic policies that aim to reduce industrial unemployment.

A model to forecast financial failure, in non financial galician SMES

We are concerned with providing more empirical evidence on forecast failure, developing forecast models, and examining the impact of events such as audit reports. A joint consideration of classic financial ratios and relevant external indicators leads us to build a basic prediction model focused in non-financial Galician SMEs. Explanatory variables are relevant financial indicators from the viewpoint of the financial logic and financial failure theory. The paper explores three mathematical models: discriminant analysis, Logit, and linear multivariate regression. We conclude that, even though they both offer high explanatory and predictive abilities, Logit and MDA models should be used and interpreted jointly.

Finantial risk analysis of portuguese textile and tourism companies

Textile and tourism sectors are two important industries in the Portuguese economy. However, its high exposure to both internal and international economic volatility make the companies operating in these economic sectors particularly vulnerable to economic crises, such as the ones which have been impacting Portugal and the European Union. The objective of this paper is to evaluate and understand the impact of size and age on the financial health of textile and tourism companies, measured by economic indices. An empirical based model is proposed. Its implications are derived and tested on a sample of 4061 Portuguese companies from textile and tourism sectors, during the period 2005-2009. The findings suggest that age has a major impact on the risk of failure, rather than size. Whereas the effect of age is generally positive regarding the financial health of the company, the effect of size is less clear and ultimately depends on the age of the company.

The impact of size and age of the company on assessing financial risk

Textiles and tourism sectors are two important sectors in Portuguese economy. Its high exposure to both internal and international economy volatility transform the companies operating in these economic sectors especially vulnerable to recent economic crises in Portugal and European Union. The objective of this paper is to evaluate and understand the impact of size and age on the financial health of textile and tourism companies, measured by economic indices. An empirical based model is proposed. Its implications are derived and tested on a sample of 4061 Portuguese companies from textile and tourism sector, during the period 2005-2009. The results conclude that age has a stronger impact on the risk of failure than size. Whereas the effect of age is generally positive regarding the financial health of the company, the effect of size is less clear and depends on the age of the company.

Financial Risk Analysis of Portuguese Textile and Tourism Companies

Textile and tourism sectors are two important industries in the Portuguese economy. However, its high exposure to both internal and international economic volatility make the companies operating in these economic sectors particularly vulnerable to economic crises, such as the ones which have been impacting Portugal and the European Union. The objective of this paper is to evaluate and understand the impact of size and age on the financial health of textile and tourism companies, measured by economic indices. An empirical based model is proposed. Its implications are derived and tested on a sample of 4061 Portuguese companies from textile and tourism sectors, during the period 2005-2009. The findings suggest that age has a major impact on the risk of failure, rather than size. Whereas the effect of age is generally positive regarding the financial health of the company, the effect of size is less clear and ultimately depends on the age of the company.

Financial Risk Analysis of Portuguese Textile and Tourism Companies

Textile and tourism sectors are two important industries in the Portuguese economy. However, its high exposure to both internal and international economic volatility make the companies operating in these economic sectors particularly vulnerable to economic crises, such as the ones which have been impacting Portugal and the European Union. The objective of this paper is to evaluate and understand the impact of size and age on the financial health of textile and tourism companies, measured by economic indices. An empirical based model is proposed. Its implications are derived and tested on a sample of 4061 Portuguese companies from textile and tourism sectors, during the period 2005-2009. The findings suggest that age has a major impact on the risk of failure, rather than size. Whereas the effect of age is generally positive regarding the financial health of the company, the effect of size is less clear and ultimately depends on the age of the company.

The impact of size and age of the company on assessing financial risk.

Textiles and tourism sectors are two important sectors in Portuguese economy. Its high exposure to both internal and international economy volatility transform the companies operating in these economic sectors especially vulnerable to recent economic crises in Portugal and European Union. The objective of this paper is to evaluate and understand the impact of size and age on the financial health of textile and tourism companies, measured by economic indices. An empirical based model is proposed. Its implications are derived and tested on a sample of 4061 Portuguese companies from textile and tourism sector, during the period 2005-2009. The results conclude that age has a stronger impact on the risk of failure than size. Whereas the effect of age is generally positive regarding the financial health of the company, the effect of size is less clear and depends on the age of the company.

Fatores determinantes do (in)sucesso de clínicas/gabinetes particulares com a valência de terapia da fala nos distritos de Porto e Aveiro

A presente dissertação apresenta o resultado de uma pesquisa realizada, através da recolha de dados, nos distritos do Porto e Aveiro, onde foram analisados os fatores determinantes do (in)sucesso estratégico de clínicas/gabinetes (CG) particulares com a valência de terapia da fala (TF). Inicia com a apresentação de algumas considerações conceptuais relativas à empresa, organização e inovação. De seguida, são descritos os principais passos a dar em Portugal para a constituição de uma empresa e é feita uma abordagem aos temas da viabilidade estratégica de um projeto e do conceito de plano de negócios. A parte teórica do presente projeto de investigação encerra com os fatores de sucesso e insucesso empresarial descritos na literatura. Neste trabalho, procura-se analisar as principais determinantes de sobrevivência das novas empresas ligadas à área da TF. Para tal, procedeu-se à recolha de dados junto de proprietários e/ou gestores de CG particulares com TF, nos distritos de Porto e Aveiro, selecionados a partir da base de dados da Entidade Reguladora da Saúde (ERS), das Páginas Amarelas Online e da Internet com as palavraschave: “clínicas, gabinetes, terapia da fala”. Os resultados estatisticamente tratados e analisados evidenciam a importância dos seguintes fatores como estatisticamente significativos para o sucesso de uma CG privada com TF nos distritos de Porto e Aveiro: maior antiguidade da CG, maior número de utentes, de concorrentes e de TF a trabalhar, assim como a realização de rastreios na área da TF. Fatores como: proprietário com formação na área da gestão, maior número de valências, publicidade e acessibilidades na CG, parecem contribuir para o aumento das hipóteses de sobrevivência de CG particulares com TF nos distritos de Porto e Aveiro, ainda que não sejam estatisticamente significativos. Em contrapartida, a falta de um plano de negócios parece ser um fator que influencia o insucesso destas CG.

Análisis del impacto del tamaño de los activos en la cuenta de resultados mediante la utilización de espacios de fase y análisis de recurrencia

Los resultados financieros de las organizaciones son objeto de estudio y análisis permanente, predecir sus comportamientos es una tarea permanente de empresarios, inversionistas, analistas y académicos. En el presente trabajo se explora el impacto del tamaño de los activos (valor total de los activos) en la cuenta de resultados operativos y netos, analizando inicialmente la relación entre dichas variables con indicadores tradicionales del análisis financiero como es el caso de la rentabilidad operativa y neta y con elementos de estadística descriptiva que permiten calificar los datos utilizados como lineales o no lineales. Descubriendo posteriormente que los resultados financieros de las empresas vigiladas por la Superintendencia de Sociedades para el año 2012, tienen un comportamiento no lineal, de esta manera se procede a analizar la relación de los activos y los resultados con la utilización de espacios de fase y análisis de recurrencia, herramientas útiles para sistemas caóticos y complejos. Para el desarrollo de la investigación y la revisión de la relación entre las variables de activos y resultados financieros se tomó como fuente de información los reportes financieros del cierre del año 2012 de la Superintendencia de Sociedades (Superintendencia de Sociedades, 2012).

Epidemiología y perdurabilidad empresarial en Colombia: Grupo Éxito

La muerte empresarial es un proceso que se ha venido presentando en compañías de las diferentes industrias a nivel nacional. La causa son los diferentes factores externos que impactan directamente las operaciones y estructura de estas. Con base en lo anterior es importante resaltar que existen diferentes tipos de muerte empresarial que para efectos de este trabajo se encontraron importante referenciar, pues son el marco del análisis de caso sobre Almacenes Éxito S.A. perteneciente al sector retail, donde se buscaba determinar cuál fue el tipo de cesión que tuvo, como consecuencia de la venta de acciones a la Compañía Francesa Casino Guichard-Perrachon S.A. Además del marco teórico empleado, se encontró importante realizar una reseña histórica de las diferentes empresas que han integrado el sector con el fin de entender posibles generalidades que se han venido replicando y que han llevado a la muerte empresarial de importantes compañías. Este trabajo permite la comprensión de las diferentes transformaciones que pueden tener los entes económicos a lo largo de su vida empresarial, no solo con lo que puede entenderse como el cese de operaciones sino también como apertura a nuevas estrategias de crecimiento y expansión.

The price of risk in construction projects: contingency approximation model (CAM)

Little attention has been focussed on a precise definition and evaluation mechanism for project management risk specifically related to contractors. When bidding, contractors traditionally price risks using unsystematic approaches. The high business failure rate our industry records may indicate that the current unsystematic mechanisms contractors use for building up contingencies may be inadequate. The reluctance of some contractors to include a price for risk in their tenders when bidding for work competitively may also not be a useful approach. Here, instead, we first define the meaning of contractor contingency, and then we develop a facile quantitative technique that contractors can use to estimate a price for project risk. This model will help contractors analyse their exposure to project risks; and help them express the risk in monetary terms for management action. When bidding for work, they can decide how to allocate contingencies strategically in a way that balances risk and reward.

Estudo sobre a mortalidade e sobrevivência de micro e pequenas empresas natalenses e seus impactos nas políticas públicas pró-empreendedorismo

The principal purpose of this research was to investigate discriminant factors of survival and failure of micro and small businesses, and the impacts of these factors in the public politics for entrepreneurship in the State of Rio Grande do Norte. The data were ceded by SEBRAE/RN and the Commercial Committee of the Rio Grande do Norte State and it included the businesses that were registered in 2000, 2001 and 2002. According to the theoretical framework 3 groups of factors were defined Business Financial Structure, Entrepreneurial Preparation and Entrepreneurial Behavior , and the factors were studied in order to determine whether they are discriminant or not of the survival and business failure. A quantitative research was applied and advanced statistical techniques were used multivariate data analysis , beginning with the factorial analysis and after using the discriminant analysis. As a result, canonical discriminant functions were found and they partially explained the survival and business failure in terms of the factors and groups of factors. The analysis also permitted the evaluation of the public politics for entrepreneurship and it was verified, according to the view of the entrepreneurs, that these politics were weakly effective to avoid business failure. Some changes in the referred politics were suggested based on the most significant factors found.

Watch that space! The county hierarchy in firm births and deaths in the UK, 1980-1999

The paper investigates the relationships between registrations, de-registrations and population density at county level in the UK using VAT data for 20 years over the period 1980–1999. The rationale for this is based on the need to understand how the extent to which, in different parts of the UK, differences in the relationship between birth rates and death rates combine to produce an interpretable pattern in net birth rates. The analysis of the net birth rate shows that a strategy aimed at the net birth rate might, in principle, just as well aim at reducing business failure, rather than raising the birth rate. Indeed this might be more efficient, since it implies that less start-ups are ‘‘wasted’’ as it would avoid the necessity, if targets are to be reached, of encouraging those individuals who are patently unsuited to running their own business into business ownership.

Adaptation to flood risk:the case of businesses in the UK

Despite Government investment in flood defence schemes, many properties remain at high risk of flooding. A substantial portion of these properties are business establishments. Flooding can create serious consequences for businesses, including damage to property and stocks, being out of business for a considerable period and ultimately business failure. Recent flood events such as those in 2007 and 2009 that affected many parts of the UK have helped to establish the true costs of flooding to businesses. This greater understanding of the risks to businesses has heightened the need for business owners to adapt their businesses to the threat of future flooding. Government policy has now shifted away from investment in engineered flood defences, towards encouraging the uptake of property level flood resistance and resilience measures by businesses. However, implementing such adaptation strategies remains a challenge due a range of reasons. A review of the current state of property level flood risk adaptation of UK businesses is presented, drawing from extant literature. Barriers that may hinder the uptake of property level adaptation by businesses are revealed and drivers that may enhance uptake and effectively overcome these barriers are also discussed. It is concluded that the professions from the construction sector have the potential to contribute towards the adaptation of business properties and thereby the flood resilience of businesses at risk of flooding.