Bankruptcy Prediction Model Using Neural Networks

Xavier Bredart

Accounting and Finance Research, 2014, vol. 3, issue 2, 124

Abstract: Belgium has faced an important number of corporate bankruptcies during the last decade. The aim of this paper is to develop a model that predicts bankruptcy using three financial ratios that are simple and easily available, even for small businesses. We used a sample of 3,728 Belgian Small and Medium Enterprises (SME’s) including 1,864 businesses having been declared bankrupt between 2002 and 2012 and conducted a neural network analysis. Our results indicate that the neural network methodology based on three financial ratios that are simple and easily available as explanatory variables shows a good classification rate of more or less 80 percent. Results of this study may be of interest for financial institutions and for academics.

Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:jfr:afr111:v:3:y:2014:i:2:p:124

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