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Risks 2018, 6(4), 113; https://doi.org/10.3390/risks6040113

Business Distress Prediction Using Bayesian Logistic Model for Indian Firms

1
Reserve Bank of India, Mumbai 400051, India
2
Bond Business School, Bond University, Gold Coast 4229, Australia
*
Author to whom correspondence should be addressed.
Received: 25 August 2018 / Revised: 27 September 2018 / Accepted: 2 October 2018 / Published: 9 October 2018
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Abstract

The objective of the study is to perform corporate distress prediction for an emerging economy, such as India, where bankruptcy details of firms are not available. Exhaustive panel dataset extracted from Capital IQ has been employed for the purpose. Foremost, the study contributes by devising novel framework to capture incipient signs of distress for Indian firms by employing a combination of firm specific parameters. The strategy not only enables enlarging the sample of distressed firms but also enables to obtain robust results. The analysis applies both standard Logistic and Bayesian modeling to predict distressed firms in Indian corporate sector. Thereby, a comparison of predictive ability of the two approaches has been carried out. Both in-sample and out of sample evaluation reveal a consistently better predictive capability employing Bayesian methodology. The study provides useful structure to indicate the early signals of failure in Indian corporate sector that is otherwise limited in literature. View Full-Text
Keywords: financial distress; firms; Bayesian analysis; logistic model financial distress; firms; Bayesian analysis; logistic model
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Shrivastava, A.; Kumar, K.; Kumar, N. Business Distress Prediction Using Bayesian Logistic Model for Indian Firms. Risks 2018, 6, 113.

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