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To Fail or Not to Fail: An Algorithm for SME Survival Prediction Using Accounting Data

In: The Changing Role of SMEs in Global Business

Author

Listed:
  • José Manuel Pereira

    (Management School)

  • Humberto Ribeiro

    (University of Aveiro)

  • Amélia Silva

    (Polytechnic Institute of Porto)

  • Sandra Raquel Alves

    (Polytechnic Institute of Leiria)

Abstract

In this book chapter, the very significant negative effects of the financial crisis were examined, in particular on micro and small and medium-sized enterprises (SMEs). An algorithm that has been constructed for predicting the survival likelihood of a corporation, using financial accounting data, is proposed here. Furthermore, due to the more common fragility of SMEs, the authors consider this algorithm as a possible tool for assessing their financial condition, providing an immediate insight about their survival odds and therefore helping management to better justify their decision-making processes, namely, the critical ones, driven to avoid business failure. Overall, the results suggest that the proposed algorithm is reliable while forecasting the survival likelihood of SMEs, based on their financial accounting reported data.

Suggested Citation

  • José Manuel Pereira & Humberto Ribeiro & Amélia Silva & Sandra Raquel Alves, 2020. "To Fail or Not to Fail: An Algorithm for SME Survival Prediction Using Accounting Data," Palgrave Studies in Cross-disciplinary Business Research, In Association with EuroMed Academy of Business, in: Alkis Thrassou & Demetris Vrontis & Yaakov Weber & S. M. Riad Shams & Evangelos Tsoukatos (ed.), The Changing Role of SMEs in Global Business, edition 1, chapter 5, pages 83-107, Palgrave Macmillan.
    • Handle: RePEc:pal:pscchp:978-3-030-45835-5_5
    DOI: 10.1007/978-3-030-45835-5_5
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