Barbara Pawełek

Classification Methods in the Research on the Financial Standing of Construction Enterprises After Bankruptcy in Poland

In the literature devoted to applications of multivariate statistical analysis to finance, the issue of bankruptcy forecasting is dealt with at length, but few papers concern the statistical evaluation of financial standing of companies after they have been declared bankrupt. The examination of their way out from the insolvency problem may be a source of valuable information, useful for the assessment of the probability that other bankrupt enterprises achieve success as a result of the execution of restructuring proposals. The purpose of this article is to present a proposal to use selected classification methods when studying the financial standing of companies after the declaration of bankruptcy in comparison with the situation of financially sound companies. The logit model and the classification tree were used to classify companies. The evaluation of the classification efficiency was based on the following measures: sensitivity, specificity and AUC. In the study, both univariate (Tukey’s criterion) and multivariate (projection depth function) methods for detecting outliers were considered. The study covered construction companies in Poland in the years 2005–2009.

The Use of Structural Equation Modelling to Select Financial Indicators for a Bankruptcy-prediction Model

The classical tool of bankruptcy prediction is the multivariate discriminant Altman model. The aim of this paper is to present a proposal for the use of structural equation modelling (SEM) to select financial indicators for an Altman-type bankruptcy prediction model. Financial factors, as diagnostic variables in bankruptcy-prediction models, are not in fact directly measurable variables, and they ought to be recognised as latent variables described by various measured financial indicators. So it is possible to use a structural equation modelling (SEM) approach for this purpose. A path diagram in terms of SEM for the Altman model is presented. Based on this diagram, three variants of SEM models for the general Altman model are estimated. The essential problem tackled in this paper is how to appropriately select non-bankrupt firms. Matching pair sample selection methods are applied. The non-bankrupt firms are from the same branch of industry and are similar in size. The major objective of our methodological proposal to use a general SEM model to study corporate bankruptcy is to overcome the difficulties in the modelling of bankruptcy risk through the use of previously-applied methods.