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Open AccessArticle

Assessment of Bankruptcy Risk of Large Companies: European Countries Evolution Analysis

1
Department of Business Administration, “Dunarea de Jos” University of Galati, 800008 Galati, Romania
2
GOVCOPP—Research Unit in Governance, Competitiveness and Public Policy, Department of Economics, Management, Industrial Engineering and Tourism (DEGEIT), University of Aveiro, 3810-193 Aveiro, Portugal
*
Author to whom correspondence should be addressed.
J. Risk Financial Manag. 2020, 13(3), 58; https://doi.org/10.3390/jrfm13030058
Received: 27 January 2020 / Revised: 14 March 2020 / Accepted: 15 March 2020 / Published: 18 March 2020
Assessment and estimation of bankruptcy risk is important for managers in decision making for improving a firm’s financial performance, but also important for investors that consider it prior to making investment decision in equity or bonds, creditors and company itself. The aim of this paper is to improve the knowledge of bankruptcy prediction of companies and to analyse the predictive capacity of factor analysis using as basis the discriminant analysis and the following five models for assessing bankruptcy risk: Altman, Conan and Holder, Tafler, Springate and Zmijewski. Stata software was used for studying the effect of performance over risk and bankruptcy scores were obtained by year of analysis and country. Data used for non-financial large companies from European Union were provided by Amadeus database for the period 2006–2015. In order to analyse the effects of risk score over firm performance, we have applied a dynamic panel-data estimation model, with Generalized Method of Moments (GMM) estimators to regress firm performance indicator over risk by year and we have used Tobit models to infer about the influence of company performance measures over general bankruptcy risk scores. The results show that the Principal Component Analysis (PCA) used to build a bankruptcy risk scored based on discriminant analysis indices is effective for determining the influence of corporate performance over risk. View Full-Text
Keywords: European large companies; bankruptcy risk; company performance; bankruptcy prediction; Principal Component Analysis European large companies; bankruptcy risk; company performance; bankruptcy prediction; Principal Component Analysis
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Bărbuță-Mișu, N.; Madaleno, M. Assessment of Bankruptcy Risk of Large Companies: European Countries Evolution Analysis. J. Risk Financial Manag. 2020, 13, 58.

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