The Prediction of Corporate Bankruptcy and Czech Economy’s Financial Stability through Logit Analysis

Petr Jakubík and Petr Teply

No 2008/19, Working Papers IES from Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies

Abstract: This article presents a financial scoring model estimated on Czech corporate accounting data. Seven financial indicators capable of explaining business failure at a 1-year prediction horizon are identified. Using the model estimated in this way, an aggregate indicator of the creditworthiness of the Czech corporate sector (named as JT index) is then constructed and its evolution over time is shown. This indicator aids the estimation of the risks of this sector going forward and broadens the existing analytical set-up used by the Czech National Bank for its financial stability analyses. The results suggest that the creditworthiness of the Czech corporate sector steadily improved between 2004 and 2006, but slightly deteriorated in 2007 what could be explained through global market turbulences.

Keywords: bankruptcy prediction; financial stability; logit analysis; corporate sector risk; JT index (search for similar items in EconPapers)
JEL-codes: G21 G28 G32 G33 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2008-09, Revised 2008-09
New Economics Papers: this item is included in nep-rmg and nep-tra
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