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Bootstrap Replacement to Validate the Influence of the Economic Cycle on the Structure and the Accuracy Level of Business Failure Prediction Models

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  • Montserrat Manzaneque
  • Domingo GarcíA‐Pérez‐De‐Lema
  • Marcos Antón Renart

Abstract

The aim of this study was to answer the question of how the economic cycle affects the stability and efficiency of business failure prediction models, using bootstrap replacement method for validation. We analyse 2228 Spanish small and medium‐sized enterprises for the period 2001–2009, and divide it into three different phases of the economic cycle (growth, crisis, recession). We find that the structure and the ability of business failure prediction models are different according to the economic cycle. These findings are relevant for the debate on the most suitable financial ratios when developing business failure prediction models and to pose their accuracy level in these prediction models. Copyright © 2015 John Wiley & Sons, Ltd.

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  • Montserrat Manzaneque & Domingo GarcíA‐Pérez‐De‐Lema & Marcos Antón Renart, 2015. "Bootstrap Replacement to Validate the Influence of the Economic Cycle on the Structure and the Accuracy Level of Business Failure Prediction Models," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 34(4), pages 275-289, July.
    • Handle: RePEc:wly:jforec:v:34:y:2015:i:4:p:275-289
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    Cited by:

    1. Xiaobo Tang & Shixuan Li & Mingliang Tan & Wenxuan Shi, 2020. "Incorporating textual and management factors into financial distress prediction: A comparative study of machine learning methods," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 39(5), pages 769-787, August.
    2. David Veganzones, 2022. "Corporate failure prediction using threshold‐based models," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 41(5), pages 956-979, August.
    3. Andrea Flori & Simone Giansante & Claudia Girardone & Fabio Pammolli, 2021. "Banks’ business strategies on the edge of distress," Annals of Operations Research, Springer, vol. 299(1), pages 481-530, April.

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