Z-Score for Bankruptcy Forecasting of the Companies Producing Building Materials

By Burganova, R. A.; Salahieva, M. F. | Asian Social Science, May 2015 | Go to article overview

Z-Score for Bankruptcy Forecasting of the Companies Producing Building Materials


Burganova, R. A., Salahieva, M. F., Asian Social Science


Abstract

The article is dedicated to developing of methodological basis for the probability of enterprises' bankruptcy forecasting. The authors have identified the reasons of the existing bankruptcy forecasting models failure, the necessity of models developing for companies in various industries on the basis of the existing instruments. As a result of the multivariate discriminate analysis we offer Z-scores based on the average annual rates of change and taking into account the peculiarities of the industry companies. The model is developed for companies specializing in the production of building materials, it has a high level of productivity - 90.4%.

Keywords: region's economic area, regional competition, regional competitive advantages, competitive positioning, economic activities, industrial enterprise's resource potential, economic area "growth points"

1. Introduction

The high level of competition and the unstable economic environment necessitate the use of crisis management instruments. One of the information sources for the development and implementation of preventive tactical measures providing the reduction of the enterprises' insolvency risk are the results of the bankruptcy forecasting models (Ravi Kumar & Ravi, 2007; Shuang, Yuan, Zhang, & Yu, 2011; Yakupova & Absalyamova, 2014). Systematization of research on the application of bankruptcy forecasting methods is presented in the work by Ravi Kumar, P., Ravi, V. (Nasir, John, Bennett, & Russell, 2000) dealing with the following classification: (i) statistical techniques, (ii) neural networks, (iii) case-based reasoning, (iv) decision trees, (iv)operational research, (v) evolutionary approaches, (vi) rough set based techniques, (vii) other techniques subsuming fuzzy logic, support vector machine and isotonic separation and (viii) softcomputing subsuming seamless hybridization of all the above-mentioned techniques.

Feng Yu Lin, McClean, S. offered a data mining approach to the forecasting of corporate failure and proved, that a hybrid method produces higher forecasting accuracy than individual classifiers (Burganova, Novak, & Salahieva, 2014).

Problems of application, advantages and disadvantages of AdaBoost and neural networks are presented in the works (Alfaro, García, Gámez, & Elizondo, 2008; Azmitov, Ivanovskiy, & Korabelnikova, 2014). Dimitras, A. I., Slowinski, R., Susmaga, R., Zopounidis, C. (1999) offer to use rough sets. Du Jardin, P., Séverin, E. suggested to use a Kohonen map to increase the forecasting horizon of a financial failure model (2011).

Despite the great diversity of approaches and methods for the forecasting of bankruptcy the greatest preference is often given to the quantitative, based on statistical methods.

Balcaen, S., Ooghe, H. investigated the classic statistical business failure forecasting models and their related problems (2006), Shuang, Q., Yuan, Y., Zhang, M., Yu, D. described based on Fisher's Linear Discriminant Analysis (2012).

As supporters of quantitative methods, we agree with the researchers, who suppose that the Z-scores and R-accounts stipulating the use of the absolute values of the coefficients cannot bear universal character. Simultaneous application of different "universal" models often leads to the opposite results, which casts doubt on their practical significance.

The results obtained by the existing models have turned out to be multidirectional due to a number of circumstances.

Firstly, due to the quality of the sampling in the formation of models. Large volume of samples regardless of industrial and regional characteristics cannot be sufficient grounds for the formation of the model. Large disparities in the development of industries within the same region, different structure of assets, marketable products and its consumption require sampling of businesses from the sample industry, and, if possible, within the limits of one region. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Z-Score for Bankruptcy Forecasting of the Companies Producing Building Materials
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.