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A Model to Predict Corporate Failure in the Developing Economies: A Case of Listed Companies on the Ghana Stock Exchange

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  • Richard Oduro
  • Michael Amoh Aseidu

Abstract

The study aimed at developing a model that predict the probability of failure of companies operating in the developing economies using financial ratios and non-financial ratio. The logit model was the main statistical tool applied. A matched sample design was used. Three models were developed and compared; a model consisting of financial ratios only (Model 1), non-financial ratios only (Model 2) and both financial and non-financial ratios (Model 3). From the study, comparatively Model 3 is more efficient in predicting the corporate failure status in one year from now. Prediction of failure status of a corporate entity therefore should consider both financial and non-financial variables.JEL classification numbers: G3Keywords: Corporate failure, corporate governance, logit model, log-likelihood, Ghana Stock Exchange.

Suggested Citation

  • Richard Oduro & Michael Amoh Aseidu, 2017. "A Model to Predict Corporate Failure in the Developing Economies: A Case of Listed Companies on the Ghana Stock Exchange," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 7(4), pages 1-5.
    • Handle: RePEc:spt:apfiba:v:7:y:2017:i:4:f:7_4_5
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    References listed on IDEAS

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