Mixed logistic model applied to bankruptcy prediction of Argentinean companies

FLORENCIA

Congreso; World Congress of Accounting Educators and Researchers; 2014

IAAER

Mixed logistics models are said to outperform previous bankruptcy prediction models; the purpose of this study is to test that assertion with data from an emerging economy. This paper develops and applies a mixed logistic method to predict financial distress risk of companies operating in an emerging economy. The model uses financial statement data of firms listed in the Buenos Aires Stock Exchange during 1993-2000; Altman (1993) and Jones and Hensher (2004) ratios are calculated. Results show that, similarly to previous studies, profitability, assets turnover, debt leverage and cash flow from operations allow modeling the probability of financial distress. The most notable contribution of the new estimation method is its excellent performance also when applied to a period of economic stability of an emerging economy since all companies are properly assigned to group membership, making type I error equal to zero.