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Long-term Predictive Ability of Bankruptcy Models in the Czech Republic: Evidence from 2007-2012

Ondrej Machek

Central European Business Review, 2014, vol. 2014, issue 2, 14-17

Abstract: Bankruptcy models are a common tool of financial analysis to predict the financial distress of companies. However, in the recent years, the instability and risk of the overall economic environment have underlined the need for accurate tools to predict bankruptcy and assess the overall performance of companies. In this article, we analyze the ex-ante predictive ability of selected bankruptcy and solvency models commonly used in financial analysis: Kralicek quick test, Taffler model, the IN99 and IN05 indexes, and Altman Z'-score models in the case of Czech companies from 2007 to 2012. We determined the percentage of cases when these models correctly predicted failures of companies up to five years in advance, and found that the IN05 and IN99 credibility indexes provided the best results, as well as the Altman Z'-score model. However, the predictive ability of the Taffler model and Kralicek quicktest has only been limited.

Keywords: bankruptcy prediction; Altman Z'-score; Taffler model; Kralicek quick test; IN05; IN99 (search for similar items in EconPapers)
JEL-codes: G30 G33 (search for similar items in EconPapers)
Date: 2014
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Faculty of Business Administration, University of Economics, Prague

DOI: 10.18267/j.cebr.80

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