A Multicriteria Discrimination Method for the Prediction of Financial Distress: The Case of Greece

Michael Doumpos and Constantin Zopounidis
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Michael Doumpos: Technical University of Crete, Greece
Constantin Zopounidis: Technical University of Crete, Greece

Multinational Finance Journal, 1999, vol. 3, issue 2, 71-101

Abstract: Financial distress prediction is an essential issue in finance. Especially in emerging economies, predicting the future financial situation of individual corporate entities is even more significant, bearing in mind the general economic turmoil that can be caused by business failures. The research on developing quantitative financial distress prediction models has been focused on building discriminant models distinguishing healthy firms from financially distressed ones. Following this discrimination approach, this paper explores the applicability of a new non–parametric multicriteria decision aid discrimination method, called M.H.DIS, to predict financial distress using data concerning the case of Greece. A comparison with discriminant and logit analysis is performed using both a basic and a holdout sample. The results show that M.H.DIS can be considered as a new alternative tool for financial distress prediction. Its performance is superior to discriminant analysis and comparable to logit analysis.

Keywords: discrimination; financial distress; mathematical programming; multi-criteria decision aid (search for similar items in EconPapers)
JEL-codes: C25 C44 C61 G33 (search for similar items in EconPapers)
Date: 1999
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Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:mfj:journl:v:3:y:1999:i:2:p:71-101

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