A Parametric or Nonparametric Approach for Creating a new Bankruptcy Prediction Model: The Evidence from the Czech Republic

Result code in IS VaVaI

<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F00216305%3A26510%2F14%3APU109289" target="_blank" >RIV/00216305:26510/14:PU109289 - isvavai.cz</a>

Result on the web

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DOI - Digital Object Identifier

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Result language

angličtina

Original language name

A Parametric or Nonparametric Approach for Creating a new Bankruptcy Prediction Model: The Evidence from the Czech Republic

Original language description

For many years now the development of models capable of predicting company bankruptcy has aimed at increasing their accuracy. Among the decisive factors determining the accuracy of the bankruptcy model have been the choice of variable models and applied classification algorithms. The prevailing opinion in literature is that the accuracy of bankruptcy models cannot be appreciably improved by the choice of classification algorithm. A reflection of this assertion is the frequent usage of parametric methods. In particular this involves the method of linear discrimination analysis. This method formed the basis of the first bankruptcy model and continues to be the most frequently applied classification algorithm. However, it requires the fulfilment of assumptions which financial data does not provide and therefore limits the improvement of the models predictive capabilities. This led the authors to the idea of testing the possibility of improving the bankruptcy models predictive capabilities by using non-traditional approaches. Using the example of companies from the Czech Republic it was discovered that a nonparametric method, when used for the selection of model variables as well as the actual classification, can yield significantly better results than the traditional parametric approach.

Czech name

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Czech description

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Type

J_SC - Article in a specialist periodical, which is included in the SCOPUS database

CEP classification

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OECD FORD branch

50602 - Public administration

Project

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Continuities

S - Specificky vyzkum na vysokych skolach

Publication year

2014

Confidentiality

S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Name of the periodical

INTERNATIONAL JOURNAL of MATHEMATICAL MODELS AND METHODS IN APPLIED SCIENCES

ISSN

1998-0140

e-ISSN

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Volume of the periodical

8

Issue of the periodical within the volume

1

Country of publishing house

US - UNITED STATES

Number of pages

10

Pages from-to

214-223

UT code for WoS article

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EID of the result in the Scopus database

2-s2.0-84902459281