IDEAS home Printed from https://ideas.repec.org/a/sae/ausman/v31y2006i1p17-27.html
   My bibliography  Save this article

Bankruptcy Prediction: Application of Logit Analysis in Export Credit Risks

Author

Listed:
  • Li-Chiu Chi

    (Department of Finance, National Formosa University, 4 Wenhwa Road, Huwei, Yunlin County 632, Taiwan, ROC.)

  • Tseng-Chung Tang

    (Department of Finance, National Formosa University, 4 Wenhwa Road, Huwei, Yunlin County 632, Taiwan, ROC.)

Abstract

To date, relatively little empirical research has been conducted on the efficacy of the trade credit risk prediction model in the context of international trade applications. Using a sample of listed firms in seven Asia-Pacific capital markets (Hong Kong Japan, Korea, Malaysia Singapore, Thailand, and the Philippines) from 2001 to 2003 with available data, we have made a preliminary attempt at empirically studying a predictive export credit risk model based on financial ratios, firm-specific characteristics (size, maturity, R&D expenses, and depreciation expenses), and country risk measures. The results show that our Logit models demonstrate decent classification accuracy and robustness. Specifically, the prediction ability is approximately equal to classification ability when the model is applied to a testing sample. Furthermore, the results indicate that the closer the analysis is to the credit crisis occurrence, the more improved the classification accuracy and prediction accuracy are.

Suggested Citation

  • Li-Chiu Chi & Tseng-Chung Tang, 2006. "Bankruptcy Prediction: Application of Logit Analysis in Export Credit Risks," Australian Journal of Management, Australian School of Business, vol. 31(1), pages 17-27, June.
  • Handle: RePEc:sae:ausman:v:31:y:2006:i:1:p:17-27
    DOI: 10.1177/031289620603100102
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/031289620603100102
    Download Restriction: no

    File URL: https://libkey.io/10.1177/031289620603100102?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Beynon, Malcolm J. & Peel, Michael J., 2001. "Variable precision rough set theory and data discretisation: an application to corporate failure prediction," Omega, Elsevier, vol. 29(6), pages 561-576, December.
    2. Nicholas Wilson & Barbara Summers, 2002. "Trade Credit Terms Offered by Small Firms: Survey Evidence and Empirical Analysis," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 29(3&4), pages 317-351.
    3. Zhang, Guoqiang & Y. Hu, Michael & Eddy Patuwo, B. & C. Indro, Daniel, 1999. "Artificial neural networks in bankruptcy prediction: General framework and cross-validation analysis," European Journal of Operational Research, Elsevier, vol. 116(1), pages 16-32, July.
    4. Edward I. Altman, 1968. "Financial Ratios, Discriminant Analysis And The Prediction Of Corporate Bankruptcy," Journal of Finance, American Finance Association, vol. 23(4), pages 589-609, September.
    5. Zmijewski, Me, 1984. "Methodological Issues Related To The Estimation Of Financial Distress Prediction Models," Journal of Accounting Research, Wiley Blackwell, vol. 22, pages 59-82.
    6. Eisenbeis, Robert A, 1977. "Pitfalls in the Application of Discriminant Analysis in Business, Finance, and Economics," Journal of Finance, American Finance Association, vol. 32(3), pages 875-900, June.
    7. Nicholas Wilson & Barbara Summers, 2002. "Trade Credit Terms Offered by Small Firms: Survey Evidence and Empirical Analysis," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 29(3‐4), pages 317-351, April.
    8. Frydman, Halina & Altman, Edward I & Kao, Duen-Li, 1985. "Introducing Recursive Partitioning for Financial Classification: The Case of Financial Distress," Journal of Finance, American Finance Association, vol. 40(1), pages 269-291, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Situm Mario, 2014. "Inability of Gearing-Ratio as Predictor for Early Warning Systems," Business Systems Research, Sciendo, vol. 5(2), pages 23-45, September.
    2. Wikil Kwak & Yong Shi & Gang Kou, 2012. "Bankruptcy prediction for Korean firms after the 1997 financial crisis: using a multiple criteria linear programming data mining approach," Review of Quantitative Finance and Accounting, Springer, vol. 38(4), pages 441-453, May.
    3. Karen Benson & Peter M Clarkson & Tom Smith & Irene Tutticci, 2015. "A review of accounting research in the Asia Pacific region," Australian Journal of Management, Australian School of Business, vol. 40(1), pages 36-88, February.
    4. Shih, Kuang Hsun & Cheng, Ching Chan & Wang, Yi Hsien, 2011. "Financial Information Fraud Risk Warning for Manufacturing Industry - Using Logistic Regression and Neural Network," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 54-71, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Şaban Çelik & Bora Aktan & Bruce Burton, 2022. "Firm dynamics and bankruptcy processes: A new theoretical model," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 41(3), pages 567-591, April.
    2. Şaban Çelik, 2013. "Micro Credit Risk Metrics: A Comprehensive Review," Intelligent Systems in Accounting, Finance and Management, John Wiley & Sons, Ltd., vol. 20(4), pages 233-272, October.
    3. Zeineb Affes & Rania Hentati-Kaffel, 2016. "Forecast bankruptcy using a blend of clustering and MARS model - Case of US banks," Post-Print halshs-01314553, HAL.
    4. Ravi Kumar, P. & Ravi, V., 2007. "Bankruptcy prediction in banks and firms via statistical and intelligent techniques - A review," European Journal of Operational Research, Elsevier, vol. 180(1), pages 1-28, July.
    5. Apostolos G. Christopoulos & Ioannis G. Dokas & Iraklis Kollias & John Leventides, 2019. "An implementation of Soft Set Theory in the Variables Selection Process for Corporate Failure Prediction Models. Evidence from NASDAQ Listed Firms," Bulletin of Applied Economics, Risk Market Journals, vol. 6(1), pages 1-20.
    6. Virág, Miklós & Kristóf, Tamás, 2005. "Az első hazai csődmodell újraszámítása neurális hálók segítségével [Recalculation of the first Hungarian bankruptcy-prediction model using neural networks]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(2), pages 144-162.
    7. John W. Pacey & Toan M. Pham, 1990. "The Predictiveness of Bankruptcy Models: Methodological Problems and Evidence," Australian Journal of Management, Australian School of Business, vol. 15(2), pages 315-337, December.
    8. fernández, María t. Tascón & gutiérrez, Francisco J. Castaño, 2012. "Variables y Modelos Para La Identificación y Predicción Del Fracaso Empresarial: Revisión de La Investigación Empírica Reciente," Revista de Contabilidad - Spanish Accounting Review, Elsevier, vol. 15(1), pages 7-58.
    9. Petr Jakubík & Petr Teplý, 2011. "The JT Index as an Indicator of Financial Stability of Corporate Sector," Prague Economic Papers, Prague University of Economics and Business, vol. 2011(2), pages 157-176.
    10. Zeineb Affes & Rania Hentati-Kaffel, 2019. "Forecast bankruptcy using a blend of clustering and MARS model: case of US banks," Annals of Operations Research, Springer, vol. 281(1), pages 27-64, October.
    11. Dimitras, A. I. & Zanakis, S. H. & Zopounidis, C., 1996. "A survey of business failures with an emphasis on prediction methods and industrial applications," European Journal of Operational Research, Elsevier, vol. 90(3), pages 487-513, May.
    12. Bose, Indranil & Pal, Raktim, 2006. "Predicting the survival or failure of click-and-mortar corporations: A knowledge discovery approach," European Journal of Operational Research, Elsevier, vol. 174(2), pages 959-982, October.
    13. Dimitras, A. I. & Slowinski, R. & Susmaga, R. & Zopounidis, C., 1999. "Business failure prediction using rough sets," European Journal of Operational Research, Elsevier, vol. 114(2), pages 263-280, April.
    14. Kurt M. Fanning & Kenneth O. Cogger, 1994. "A Comparative Analysis of Artificial Neural Networks Using Financial Distress Prediction," Intelligent Systems in Accounting, Finance and Management, John Wiley & Sons, Ltd., vol. 3(4), pages 241-252, December.
    15. Goriunov Dmytro & Venzhyk Katerina, 2013. "Loan Default Prediction in Ukrainian Retail Banking," EERC Working Paper Series 13/07e, EERC Research Network, Russia and CIS.
    16. Zeineb Affes & Rania Hentati-Kaffel, 2016. "Forecast bankruptcy using a blend of clustering and MARS model - Case of US banks," Documents de travail du Centre d'Economie de la Sorbonne 16026, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    17. Antonio David Somoza Lopez & Josep Vallverdu Calafell, 2003. "Una comparacion de la seleccion de los ratios contables en los modelos contable-financieros de prediccion de la insolvencia empresarial," Working Papers in Economics 94, Universitat de Barcelona. Espai de Recerca en Economia.
    18. Kim, Soo Y. & Upneja, Arun, 2014. "Predicting restaurant financial distress using decision tree and AdaBoosted decision tree models," Economic Modelling, Elsevier, vol. 36(C), pages 354-362.
    19. Zeineb Affes & Rania Hentati-Kaffel, 2016. "Forecast bankruptcy using a blend of clustering and MARS model - Case of US banks," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-01314553, HAL.
    20. Harlan Platt & Marjorie Platt, 2002. "Predicting corporate financial distress: Reflections on choice-based sample bias," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 26(2), pages 184-199, June.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:ausman:v:31:y:2006:i:1:p:17-27. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: http://www.agsm.edu.au .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.