Tax Arrears Versus Financial Ratios in Bankruptcy Prediction

Oliver Lukason and Art Andresson
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Oliver Lukason: Faculty of Economics and Business Administration, University of Tartu, Liivi 4, 50409 Tartu, Estonia
Art Andresson: Faculty of Economics and Business Administration, University of Tartu, Liivi 4, 50409 Tartu, Estonia

JRFM, 2019, vol. 12, issue 4, 1-13

Abstract: This paper aims to compare the usefulness of tax arrears and financial ratios in bankruptcy prediction. The analysis is based on the whole population of Estonian bankrupted and survived SMEs from 2013 to 2017. Logistic regression and multilayer perceptron are used as the prediction methods. The results indicate that closer to bankruptcy, tax arrears’ information yields a higher prediction accuracy than financial ratios. A combined model of tax arrears and financial ratios is more useful than the individual models. The results enable us to outline several theoretical and practical implications.

Keywords: bankruptcy prediction; tax arrears; payment defaults; financial ratios (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (9)

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