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Using Financial Ratios to Identify Romanian Distressed Companies

Author

Listed:
  • Madalina Andreica

    (The Department of Economic Informatics and Cybernetics / Departamentul de Informatică şi Cibernetică Economică - CSIE ASE - The Faculty of Economic Cybernetics, Statistics and Informatics, Academia de Studii Economice din Bucureşti - A.S.E. - The Bucharest Academy of Economic Studies / Academia de Studii Economice din Bucureşti)

  • Mugurel Ionut Andreica

    (Parallel and Distributed Systems Laboratory [Bucarest] - University Politehnica of Bucarest)

  • Marin Andreica

    (CIG ASE - The Faculty of Accounting and Management Information Systems, Academia de Studii Economice din Bucureşti - A.S.E. - The Bucharest Academy of Economic Studies / Academia de Studii Economice din Bucureşti)

Abstract

In the context of the current financial crisis, when more companies are facing bankruptcy or insolvency, the paper aims to find methods to identify distressed firms by using financial ratios. The study will focus on identifying a group of Romanian listed companies, for which financial data for the year 2008 were available. For each company a set of 14 financial indicators was calculated and then used in a principal component analysis, followed by a cluster analysis, a logit model, and a CHAID classification tree.

Suggested Citation

  • Madalina Andreica & Mugurel Ionut Andreica & Marin Andreica, 2009. "Using Financial Ratios to Identify Romanian Distressed Companies," Post-Print hal-00474278, HAL.
    • Handle: RePEc:hal:journl:hal-00474278
    Note: View the original document on HAL open archive server: https://hal.science/hal-00474278
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    References listed on IDEAS

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    3. Edward I. Altman, 1968. "The Prediction Of Corporate Bankruptcy: A Discriminant Analysis," Journal of Finance, American Finance Association, vol. 23(1), pages 193-194, March.
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    7. Beaver, Wh, 1966. "Financial Ratios As Predictors Of Failure," Journal of Accounting Research, Wiley Blackwell, vol. 4, pages 71-111.
    8. Shumway, Tyler, 2001. "Forecasting Bankruptcy More Accurately: A Simple Hazard Model," The Journal of Business, University of Chicago Press, vol. 74(1), pages 101-124, January.
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    Cited by:

    1. Muhammad Shahzad Ijaz & Ahmed Imran Hunjra & Rauf I Azam, 2017. "Forewarning Bankruptcy: An Indigenous Model for Pakistan," Business & Economic Review, Institute of Management Sciences, Peshawar, Pakistan, vol. 9(4), pages 259-286, December.
    2. Mohammed Issah & Samuel Antwi, 2017. "Role of macroeconomic variables on firms’ performance: Evidence from the UK," Cogent Economics & Finance, Taylor & Francis Journals, vol. 5(1), pages 1405581-140, January.

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    More about this item

    Keywords

    distressed company; financial ratio; cluster; CHAID; logit model;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • C40 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - General
    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General

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