A Model to Predict Corporate Failure in the Developing Economies: A Case of Listed Companies on the Ghana Stock Exchange

Richard Oduro () and Michael Amoh Aseidu
Authors registered in the RePEc Author Service: Michael Amoh Asiedu

Journal of Applied Finance & Banking, 2017, vol. 7, issue 4, 5

Abstract: The study aimed at developing a model that predict the probability of failure of companies operating in the developing economies using financial ratios and non-financial ratio. The logit model was the main statistical tool applied. A matched sample design was used. Three models were developed and compared; a model consisting of financial ratios only (Model 1), non-financial ratios only (Model 2) and both financial and non-financial ratios (Model 3). From the study, comparatively Model 3 is more efficient in predicting the corporate failure status in one year from now. Prediction of failure status of a corporate entity therefore should consider both financial and non-financial variables.JEL classification numbers: G3Keywords: Corporate failure, corporate governance, logit model, log-likelihood, Ghana Stock Exchange.

Date: 2017
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