Predicting Insolvency of the Construction Companies in the Creditworthiness Assessment Process—Empirical Evidence from Poland

Rafał Balina, Marta Idasz-Balina and Noer Azam Achsani
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Rafał Balina: Department of Finance, Institute of Economics and Finance, University of Life Sciences, 02-389 Warsaw, Poland
Marta Idasz-Balina: Department of Strategy, Kozminski University, 03-301 Warsaw, Poland
Noer Azam Achsani: School of Business, Bogor Agricultural University, Bogor 16680, Indonesia

JRFM, 2021, vol. 14, issue 10, 1-16

Abstract: Prediction insolvency is one of the most important issues during creditworthiness assessment, especially in the turmoil environment. That is why the problem of insolvency and bankruptcy prediction has been the subject of numerous studies focused on its causes, consequences, and prediction. The main goal of the study was to develop a prediction model that can be effectively used in practice to analyze and signal the risk of insolvency and bankruptcy of a construction firms. Also, the research must identify the key factors that would allow for early identification of the symptoms of the upcoming financial failure of companies from a construction sector. To reach the goal of the study discriminant analysis, logistic regression and classification trees were used. The final estimated models included nine variables related to the profitability; revenues; liquidity; asset’s structure; and dynamics of own and foreign capitals, some of which referred to the industry and market situation in a construct sector, which is a novelty compared to previous research. What is more, results show that the method chosen to estimate the insolvency prediction model could have an impact on both partial and general effectiveness in the process of creditworthiness assessment.

Keywords: insolvency; bankruptcy; construction sector; financial analysis; financial distress (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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