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Bankruptcy Prediction Model for Private Limited Companies of Lithuania

Šlefendorfas Gediminas ()
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Šlefendorfas Gediminas: Faculty of Economics, Vilnius University, Sauletekio al. 9 (building II), LT-10222,Vilnius, Lithuania

Ekonomika (Economics), 2016, vol. 95, issue 1, 134-152

Abstract: The paper is mainly devoted to the bankruptcy prediction models and their ability to assess a bankruptcy probability for Lithuanian companies. The study showed that the most common type of companies in Lithuania is a private limited company, therefore, the main objective was to analyse such companies’ financial information and by using these results, create a new bankruptcy prediction model, which would allow to predict the bankruptcy probability as accurately as possible. 145 companies (73 already bankrupt and 72 still operating) were chosen as a primary sample and by using multivariate discriminant analysis stepwise method a linear function ZGS has been created. To achieve that, 156 different financial ratios were selected as a primary input data by using correlation calculation between bankruptcy and still operating companies and Mann - Whitney U test techniques. The results showed that 89% of companies were classified correctly, which states that the model is strong enough to predict bankruptcy probability for private limited companies operating in Lithuania in a sufficient accuracy.

Keywords: bankruptcy prediction model; private limited companies; multivariate discriminant analysis method; Lithuania (search for similar items in EconPapers)
Date: 2016
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Handle: RePEc:vrs:ekonom:v:95:y:2016:i:1:p:134-152:n:7