Bankruptcy Prediction, Financial Distress and Corporate Life Cycle: Case Study of Central European Enterprises

Lucia Michalkova () and Olga Ponisciakova
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Lucia Michalkova: Faculty of Operation and Economics of Transport and Communications, University of Zilina, Univerzitna 1, 010 26 Zilina, Slovakia
Olga Ponisciakova: Faculty of Operation and Economics of Transport and Communications, University of Zilina, Univerzitna 1, 010 26 Zilina, Slovakia

Administrative Sciences, 2025, vol. 15, issue 2, 1-19

Abstract: Businesses are influenced by the cyclical nature of economic development and distinct stages in the corporate life cycle. Accurate early-warning mechanisms are crucial to mitigating bankruptcy risk, enabling timely rescue measures. This article analyses the reliability of various bankruptcy prediction models, including those by Kliestik et al., Poznanski, the modified Zmijewski, Jakubik–Teply, and Virag–Hajdu, across corporate life cycle stages. Reliability was assessed using five metrics: accuracy, balanced accuracy, F1 and F2 scores, and the Matthews correlation coefficient ( MCC ). The sample included over 5000 SMEs from Central Europe, with financial data from 2022. The findings reveal a U-shaped trend in financial distress risk, with start-ups and declining enterprises facing the highest risks. The results indicate that the Kliestik et al. model shows consistent reliability across all life cycle stages, while the Poznanski model shows more variability. Conversely, the Virag–Hajdu model exhibits significant variability in reliability, with its best performance observed during the Decline stage. The modified Zmijewski and Jakubik–Teply models show lower MCC values overall, with the modified Zmijewski model performing better at predicting the financial distress of mature shake-out firms compared to other stages.

Keywords: financial distress; corporate life cycle; reliability of model (search for similar items in EconPapers)
JEL-codes: L M M0 M1 M10 M11 M12 M14 M15 M16 (search for similar items in EconPapers)
Date: 2025
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