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Modelling the Financial Failure of Romanian Stock Companies

Author

Listed:
  • Fejér-Király Gergely

    (Sapientia Hungarian University of Transylvania (Cluj-Napoca, Romania) Department of Business Sciences)

  • Ágoston Norbert

    (IPHD in Regional Development, Faculty of Business and Economics, University of Pécs)

  • Varga József

    (Institute of Finance and Accounting, Faculty of Economic Science, Kaposvár University)

Abstract

The aim of the present article is to model and predict the financial failure of non-financial companies listed on the Bucharest Stock Exchange. The prediction models are based on the companies’ financial reports. The paper emphasizes the importance of processing outlier data and the significance of categorical independent variables. The paper contributes to bankruptcy and corporate financial failure research by presenting a Romanian situation. Results show that the model that uses 3-year financial data prior to the failure has a better accuracy. Several models have been compared, and it was found that using categorical independent variables as explanatory variables increased the accuracy of the models against those that used numerical regressors.

Suggested Citation

  • Fejér-Király Gergely & Ágoston Norbert & Varga József, 2019. "Modelling the Financial Failure of Romanian Stock Companies," Acta Universitatis Sapientiae, Economics and Business, Sciendo, vol. 7(1), pages 65-82, December.
    • Handle: RePEc:vrs:auseab:v:7:y:2019:i:1:p:65-82:n:5
    DOI: 10.2478/auseb-2019-0005
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    References listed on IDEAS

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    More about this item

    Keywords

    corporate failure prediction; parametric modelling; non-parametric modelling; bankruptcy;
    All these keywords.

    JEL classification:

    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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