BUSINESS FAILURE PREDICTION FOR ROMANIAN SMES USING MULTIVARIATE DISCRIMINANT ANALYSIS

Maricica Moscalu ()

Revista Economica, 2012, vol. Supplement, issue 4, 457-466

Abstract: Business failure prediction is one of special importance for small and medium sized enterprises (SMEs) due to their increased vulnerability. Consequently, the purpose of this paper is to investigate the utility of financial ratios and other non-financial variables to predict business failure using a sample of Romanian SMEs and applying multiple discriminant analysis. The process that leads to failure is analyzed on a three year time horizon prior to failure and the results showed that failure can be accurately predicted with at least three years in advance. The overall accuracy of classification exceeded 77% in all years and increased as failure approached.

Date: 2012
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