Tax Arrears Versus Financial Ratios in Bankruptcy Prediction
by
Oliver Lukason * and Art Andresson
Oliver Lukason * and Art Andresson
Faculty of Economics and Business Administration, University of Tartu, Liivi 4, 50409 Tartu, Estonia
*
Author to whom correspondence should be addressed.
J. Risk Financial Manag. 2019, 12(4), 187; https://doi.org/10.3390/jrfm12040187
Received: 4 November 2019 / Revised: 3 December 2019 / Accepted: 7 December 2019 / Published: 11 December 2019
(This article belongs to the Special Issue Corporate Bankruptcy Prediction—International Trends and Local Experience)
This paper aims to compare the usefulness of tax arrears and financial ratios in bankruptcy prediction. The analysis is based on the whole population of Estonian bankrupted and survived SMEs from 2013 to 2017. Logistic regression and multilayer perceptron are used as the prediction methods. The results indicate that closer to bankruptcy, tax arrears’ information yields a higher prediction accuracy than financial ratios. A combined model of tax arrears and financial ratios is more useful than the individual models. The results enable us to outline several theoretical and practical implications.
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Keywords:
bankruptcy prediction; tax arrears; payment defaults; financial ratios
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited
MDPI and ACS Style
Lukason, O.; Andresson, A. Tax Arrears Versus Financial Ratios in Bankruptcy Prediction. J. Risk Financial Manag. 2019, 12, 187.
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