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Business failure prediction using the UTADIS multicriteria analysis method

Author

Listed:
  • Constantin Zopounidis

    (Technical University of Crete, Dept. of Production Engineering and Management Financial Engineering Laboratory, University Campus)

  • Michael Doumpos

    (Technical University of Crete, Dept. of Production Engineering and Management Financial Engineering Laboratory, University Campus)

Abstract

Business failure prediction is one of the most essential problems in the field of financial management. The research on developing quantitative business failure prediction models has been focused on building discriminant models to distinguish among failed and non-failed firms. Several researchers in this field have proposed multivariate statistical discrimination techniques. This paper explores the applicability of multicriteria analysis to predict business failure. Four preference disaggregation methods, namely the UTADIS method and three of its variants, are compared to three well-known multivariate statistical and econometric techniques, namely discriminant analysis, logit and probit analyses. A basic (learning) sample and a holdout (testing) sample are used to perform the comparison. Through this comparison, the relative performance of all the aforementioned methods is investigated regarding their discriminating and predicting ability.

Suggested Citation

  • Constantin Zopounidis & Michael Doumpos, 1999. "Business failure prediction using the UTADIS multicriteria analysis method," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 50(11), pages 1138-1148, November.
    • Handle: RePEc:pal:jorsoc:v:50:y:1999:i:11:d:10.1057_palgrave.jors.2600818
    DOI: 10.1057/palgrave.jors.2600818
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