Development of a Bankruptcy Prediction Model for the Banking Sector in Mozambique Using Linear Discriminant Analysis

Reis Castigo Intupo

Papers from arXiv.org

Abstract: In Mozambique there is no evidence of a bankruptcy prediction model developed in the national economic context, yet, back in 2016, the national banking sector suffered a financial shock that resulted in Mozambique Central Bank intervention in two banks (Moza Banco, S.A. and Nosso Banco, S.A.). This was a result of the deterioration of their financial and prudential indicators, although Mozambique had been adhering to the Basel Accords since 1994. The Basel Accords provides recommendations on banking sector supervision worldwide with the aim to enhance financial system stability. While it does not predict bankruptcy, the prediction model can be used as an auxiliary tool to manage that risk, but this has to be built in the national economic context. This paper develops for Mozambique banking sector a bankruptcy prediction model in the Mozambican context through the linear discriminant analyses method, following two assumptions: (i) composition of the sample and (ii) robustness of the financial prediction indicators (the capital structure, profitability asset concentration and asset quality) from 2012 to 2020. The developed model attained an accuracy level of 84% one year before Central Bank intervention (2015) with the entire population of 19 banks of the sector, which makes it recommendable as a risk management tool for this sector.

Date: 2023-11
New Economics Papers: this item is included in nep-ban and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published in 10,2023,26-40

Downloads: (external link)
http://arxiv.org/pdf/2311.16705 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2311.16705

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().