Improving the Accuracy of Firm Failure Forecasting Using Non-Financial Variables: The Case of Croatian SME †
Abstract
:1. Introduction
2. Literature Review
3. Research Design
4. Research Results
5. Conclusions
Author Contributions
Funding
Institutional Review Board Statement
Informed Consent Statement
Data Availability Statement
Conflicts of Interest
Disclaimer
References
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SME Category | Number of Observations |
---|---|
Successful | 3046 |
Sensitive | 779 |
Failed | 814 |
Total | 4639 |
Financial Variable | Acronym | Description |
---|---|---|
Return on equity | ROE | Net earnings/Equity |
Return on assets | ROA | Net earnings/Assets |
Operating margin | OM | Operating earnings/Sales |
EBITDA to assets | EBITDAA | EBITDA/Assets |
Sales to equity | SE | Sales/Equity |
Operating cash flow to assets | OCFA | Net operating cash flow/Assets |
Working capital | WC | Working capital/Assets |
Current ratio | CR | Current assets/Current liabilities |
Quick ratio | QR | Current assets-Stock/Current liabilities |
Debt to assets | DA | Total debt/Assets |
Self-financing | SF | Equity/Assets |
Short-term debt to assets | STDA | Short-term debt/Assets |
Debt to EBITDA | DEBITDA | Total debt/EBITDA |
Operating cash flow to debt | OCFD | Net operating cash flow/Total debt |
Non-Financial Variable | Acronym | Description |
---|---|---|
Managerial experience | ME | Three groups (<5 years, 5–10 years, >10 years) |
Business diversification | BD | Three groups (one business, two or more businesses within one industry, businesses in different industries |
Settlement of obligations | SO | Four groups (late payment up to 30 days, late payment from 30 to 60 days, late payment from 60 to 90 days, late payment for more than 90 days) |
Size | S | Ln of assets |
County | C | One of 21 counties in Croatia |
Export | EX | Four groups (export sales 0%, up to 30% export sales, export sales from 30% to 60%, export sales more than 60%) |
Age | A | Three groups (<5 years, 5–10 years, >10 years) |
Variable | Estimate | St. Error | Z Value |
---|---|---|---|
Const. | 0.2150 | 0.2289 | 0.939 |
WC | −2.0607 **** | 0.5271 | −3.909 |
SF | −5.4357 **** | 0.7314 | −7.431 |
OM | −2.8503 *** | 0.8898 | −3.203 |
ROE | −0.3980 | 0.2327 | −1.710 |
Variable | Estimate | St. Error | Z Value |
---|---|---|---|
Const. | 2.1976 | 1.8158 | 1.210 |
WC | −1.8168 ** | 0.8411 | −2.160 |
SF | −4.0941 **** | 0.9895 | −4.138 |
OM | −3.8662 *** | 1.4867 | −2.600 |
S | −0.3061 | 0.2678 | −1.143 |
A 5−10 y | −2.0328 **** | 0.6100 | −3.333 |
A > 10 y | 0.3079 | 0.8719 | 0.353 |
ME 5−10 y | −1.5885 ** | 0.7128 | −2.228 |
ME > 10 y | −1.8246 ** | 0.8042 | −2.269 |
SO 30−60 d | −0.0903 | 1.0309 | −0.088 |
SO 60−90 d | 0.9045 | 0.9897 | 0.917 |
SO > 90 d | 3.7638 **** | 0.6429 | 5.854 |
Year | Model Error (%) | AUROC (%) | ||
---|---|---|---|---|
FV | F&NFV | FV | F&NFV | |
2011 | 7.91 | 5.04 | 89.34 | 97.20 |
2012 | 7.00 | 4.74 | 90.99 | 96.65 |
2013 | 9.27 | 6.36 | 89.20 | 96.61 |
2014 | 11.21 | 7.65 | 86.87 | 95.04 |
2015 | 13.27 | 12.84 | 86.36 | 89.73 |
Chi2 | df | p > Chi2 | |
---|---|---|---|
Successful and sensitive | 2113.08 | 10 | 0.0001 |
Successful and failed firms | 3720.04 | 10 | 0.0001 |
Sensitive and failed firms | 837.44 | 10 | 0.0001 |
Coefficient | St. Error | Z Value | p | |
---|---|---|---|---|
0Y | Base Outcome | |||
1Y | ||||
SF | −0.6096 | 0.2238 | −2.72 | 0.006 |
OCFD | −0.0469 | 0.0412 | −1.14 | 0.254 |
BD-MBI | −0.7155 | 0.2413 | −0.30 | 0.767 |
BD-MBMI | −0.5302 | 0.3135 | −1.69 | 0.091 |
SO 30−60 d | 4.4176 | 0.2054 | 21.51 | 0.000 |
SO 60−90 d | 4.8246 | 0.2226 | 21.67 | 0.000 |
SO > 90 d | 6.5753 | 0.5190 | 12.67 | 0.000 |
EX < 30% | −0.7165 | 0.2003 | −3.58 | 0.000 |
EX 30−60% | −0.8018 | 0.3646 | −2.20 | 0.028 |
EX > 60% | −0.3717 | 0.3107 | −1.20 | 0.232 |
A 5−10 y | −0.6534 | 0.2221 | −2.94 | 0.003 |
A > 10 y | −0.9005 | 0.3541 | −2.54 | 0.011 |
Const | −1.9046 | 0.1574 | −12.10 | 0.000 |
2Y | ||||
SF | −0.6185 | 0.2228 | −2.71 | 0.007 |
OCFD | −0.2855 | 0.0907 | −3.15 | 0.002 |
BD-MBI | −0.8810 | 0.2807 | −3.14 | 0.002 |
BD-MBMI | −1.6507 | 0.4590 | −3.60 | 0.000 |
SO 30−60 d | 3.6686 | 0.5651 | 6.49 | 0.000 |
SO 60−90 d | 6.0407 | 0.3984 | 15.16 | 0.000 |
SO > 90 d | 10.3727 | 0.5884 | 17.63 | 0.000 |
EX < 30% | −1.1166 | 0.3018 | −3.70 | 0.000 |
EX 30−60% | −1.0661 | 0.5791 | −1.84 | 0.066 |
EX > 60% | −0.4927 | 0.5031 | −0.98 | 0.327 |
A 5−10 y | −1.0914 | 0.2620 | −4.17 | 0.000 |
A > 10 y | −0.5193 | 0.4147 | −1.25 | 0.210 |
Const | −3.7462 | 0.3066 | −12.22 | 0.000 |
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Kuvek, T.; Pervan, I.; Pervan, M. Improving the Accuracy of Firm Failure Forecasting Using Non-Financial Variables: The Case of Croatian SME. Eng. Proc. 2023, 39, 62. https://doi.org/10.3390/engproc2023039062
Kuvek T, Pervan I, Pervan M. Improving the Accuracy of Firm Failure Forecasting Using Non-Financial Variables: The Case of Croatian SME. Engineering Proceedings. 2023; 39(1):62. https://doi.org/10.3390/engproc2023039062
Chicago/Turabian StyleKuvek, Tamara, Ivica Pervan, and Maja Pervan. 2023. "Improving the Accuracy of Firm Failure Forecasting Using Non-Financial Variables: The Case of Croatian SME" Engineering Proceedings 39, no. 1: 62. https://doi.org/10.3390/engproc2023039062