Practical application of the CCB model in Czechia

Vitezslav Halek ()
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Vitezslav Halek: University of Hradec Kralove, Faculty of Informatics and Management, 500 03 Hradec Kralove, Czechia

Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, 2021, vol. 39, issue 2, 299-323

Abstract: This research aimed to present a new bankruptcy prediction model and apply this original prediction method in practice. The Come Clean Bankruptcy (or CCB) model uses relevant financial indicators and ratios to detect the signs of impending financial distress in time so that the management can take appropriate measures to avoid it. The model was applied to the data reported by 199 entities operating in the textile/clothing industry in the Czech Republic. Analyzing data reported for the previous seven years enabled us to predict which companies are more likely to end in a difficult financial situation. Afterward, comparing these predictions with the actual development of those companies in 2013-2020 serves to verify the efficacy and usability of the model to corporate reality. The research has shown that companies that went bankrupt in the analyzed period represented only a fraction of the data set (roughly 4.5%). Despite the small number of financial failures occurring during the analyzed period, the CCB model could detect impending bankruptcy in one-third of the cases.

Keywords: Bankruptcy model; predicting risks; financial distress; Czech Republic (search for similar items in EconPapers)
JEL-codes: M41 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:rfe:zbefri:v:39:y:2021:i:2:p:299-323

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