DEA as a business failure prediction tool. Application to the case of galician SMEs

Llano Monelos Pablo De (), Piñeiro Sánchez Carlos () and Rodríguez López Manuel
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Llano Monelos Pablo De: University of A Coruña
Piñeiro Sánchez Carlos: University of A Coruña
Rodríguez López Manuel: University of A Coruña

Contaduría y Administración, 2014, vol. 59, issue 2, 65-96

Abstract: In the research group we are working to provide further empirical evidence on the business failure forecast. Complex fitting modelling; the study of variables such as the audit impact on business failure; the treatment of traditional variables and ratios have led us to determine a starting point based on a reference mathematical model. In this regard, we have restricted the field of study to non-financial galician SMEs in order to develop a model1 to diagnose and forecast business failure. We have developed models based on relevant financial variables from the perspective of the financial logic, voltage and financial failure, applying three methods of analysis: discriminant, logit and multivariate linear. Finally, we have closed the first cycle using mathematical programming –DEA or Data Envelopment Analysis– to support the failure forecast. The simultaneous use of models was intended to compare their respective conclusions and to look for inter-relations. We can say that the resulting models are satisfactory on the basis of their capacity for prediction. Nevertheless, DEA contains significant points of criticism regarding its applicability to business failure

Keywords: DEA operational research; business failure; forecast (search for similar items in EconPapers)
Date: 2014
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