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Insolvency Risk Prediction Using the Logit and Logistic Models: Some Evidences from Romania

Author

Listed:
  • Gheorghita DINCA

    (Faculty of Economic Sciences and Business Administration Transilvania University of Brasov)

  • Mirela Camelia BABA

    (Faculty of Economic Sciences and Business Administration Transilvania University of Brasov)

  • Marius Sorin DINCA

    (Faculty of Economic Sciences and Business Administration Transilvania University of Brasov)

  • Bardhyl DAUTI

    (Faculty of Economics, University of Tetovo)

  • Fitim DEARI

    (Faculty of Business and Economics South East European University, Tetovo)

Abstract

The authors have studied insolvency situation from Romania in the aftermath of the 2008 financial crisis, using 5 years of financial statements data for 70 Romanian companies from different economic sectors, which all entered insolvency in 2013. We have designed a model for predicting insolvency risk which can be used by any interested party, since the data for the model are readily available on the site of Romanian Fiscal Administration Agency. The model uses five financial ratios, whose dynamics is analyzed for at least three years. To test the model we have used a logit and logistic model, which validated the significant influence of total assets efficiency and accounts receivable conversion period upon insolvency risk. As such, managers and investors can follow especially the evolution of these two measures and make the best credit and investing decisions concerning analyzed companies.

Suggested Citation

  • Gheorghita DINCA & Mirela Camelia BABA & Marius Sorin DINCA & Bardhyl DAUTI & Fitim DEARI, 2017. "Insolvency Risk Prediction Using the Logit and Logistic Models: Some Evidences from Romania," ECONOMIC COMPUTATION AND ECONOMIC CYBERNETICS STUDIES AND RESEARCH, Faculty of Economic Cybernetics, Statistics and Informatics, vol. 51(4), pages 139-157.
    • Handle: RePEc:cys:ecocyb:v:50:y:2017:i:4:p:139-157
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    References listed on IDEAS

    as
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    Cited by:

    1. Bogdan POPA, 2022. "Measuring the Risk of Bankruptcy in the Romanian Economy. Developments and Perspectives," Finante - provocarile viitorului (Finance - Challenges of the Future), University of Craiova, Faculty of Economics and Business Administration, vol. 1(24), pages 91-104, November.

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    More about this item

    Keywords

    Romanian insolvencies; prediction model; economic and financial measures; logit and logistic models;
    All these keywords.

    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General

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