An Evaluation of Effectiveness of Fuzzy Logic Model in Predicting the Business Bankruptcy

Tomasz Korol () and Adrian Korodi ()
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Tomasz Korol: Gdansk University of Technology, Poland, Faculty of Management and Economics
Adrian Korodi: “Politehnica” University of Timisoara, Romania, Faculty of Automation and Computers, Deparment of Automation and Applied Informatics

Journal for Economic Forecasting, 2011, issue 3, 92-107

Abstract: In front of the current global financial crisis, the future existence of the firms is uncertain. The characteristics and the dynamics of the current world and the interdependences between the financial and economic markets around it demand a continuous research for new methods of bankruptcy prediction. The purpose of this article is to present a fuzzy logic-based system that predicts bankruptcy for one, two and three years before the possible failure of companies. The proposed fuzzy model uses as inputs financial ratios, that is dynamics of the financial ratios. In order to design and to implement the model, authors have used financial statements of 132 stock equity companies (25 bankrupt and 107 nonbankrupt). The paper presents also the testing and validation of the created fuzzy logic models.

Keywords: bankruptcy; crisis; prediction; fuzzy logic; ratings (search for similar items in EconPapers)
JEL-codes: G17 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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