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Probability of Corporate Bankruptcy over Two Periods of Crisis (2007-2010 vs 2019-2022): Application to Italian Manufacturing SMEs Using a Three Years Rating Model

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  • Marco Muscettola

Abstract

Predicting corporate insolvencies over the last three years is more complex than in the past. An empirical analysis of a sample of 2,823 SMEs operating in Northern Italy in the manufacturing sector, shows that the logistic function created to discriminate the firms that became insolvent after three years, has a lower level of accuracy when it’s built over the last period of crisis (2019-2022). The companies that entered into default status in 2022, therefore, had, three years earlier, a greater volatility of the averages of financial ratios such as to induce greater misclassifications in a hypothetical statistical forecasting model. The study compares the global financial crisis during years between 2008-2012, which had the highest peak of insolvency in 2010/2011, with the current global crisis that began with the COVID19 pandemic and has continued with the war in Ukraine and related problem of price increases. The analysis aims to detect the differences between firms of 2019 that became insolvent in 2022 compared to a previous crisis period (2007-2010).

Suggested Citation

  • Marco Muscettola, 2024. "Probability of Corporate Bankruptcy over Two Periods of Crisis (2007-2010 vs 2019-2022): Application to Italian Manufacturing SMEs Using a Three Years Rating Model," International Journal of Business and Management, Canadian Center of Science and Education, vol. 19(5), pages 1-85, September.
    • Handle: RePEc:ibn:ijbmjn:v:19:y:2024:i:5:p:85
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    References listed on IDEAS

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    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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