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Break-Up Analysis: A Method to Regain Trust in Business Transactions

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Accounting Information Systems for Decision Making

Part of the book series: Lecture Notes in Information Systems and Organisation ((LNISO,volume 3))

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Abstract

The financial crisis resulted in a loss of trust; not only within the investment or banking sector, but in general between creditors and debtors, because many organizations faced insolvency. Such a financial situation can even result in a company’s bankruptcy. Therefore it is necessary to get a realistic understanding of the solvency or the possible insolvency of a company. The support of a decision on a debtor’s creditability is not yet sufficiently provided by the most prominent method (Altman’s Z’’-score). The paper presents a procedure called Break-Up Analysis (BUA). It helps to decide on the solvency of a company. The comparison of the BUA to Altman’s Z’’-score shows an improvement of the identification of solvent and insolvent companies by 22 %. The BUA enables herewith to regain trust in business transaction by not identifying only the insolvent companies but the solvent ones as well.

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Notes

  1. 1.

    Authors cited by Li et al. [38].

  2. 2.

    Fallcoweb.it (Portale dei Fallimenti) it’s a free to access daily updated database where data from forty-four Italian Bankruptcy Courts is stored.

  3. 3.

    Bilanci di Marca is a project developed by three Italian University (University of Macerata, University of Ancona, University of Urbino), coordinated by Professor Antonella Paolini, Professor Stefano Marasca and Professor Massimo Ciambotti. Each year a team composed by academics reviews the financial statements of a sample of companies-operating in the Marche Region (Italy)—grouped by turnover and employees. More information on Bilanci di Marca Awards can be found on www.bilancidimarca.it.

  4. 4.

    XBRL is a standard for electronic reporting, which gets more and more mandated across the world in the recent years (http://xbrlplanet.org/index.php).

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Authors and Affiliations

  1. University of Macerata, Macerata, Italy

    Bruno Maria Franceschetti

  2. Technische Universität Bergakademie Freiberg, Freiberg, Germany

    Claudia Koschtial & Carsten Felden

Authors
  1. Bruno Maria Franceschetti
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  2. Claudia Koschtial
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  3. Carsten Felden
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Correspondence to Bruno Maria Franceschetti .

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Editors and Affiliations

  1. Parthenope University of Naples, Via Medina 40, Naples, 80133, Italy

    Daniela Mancini

  2. , School of Economics and Management, Tilburg University, Spoorlaan 293, Tilburg, 5038, Netherlands

    Eddy H. J. Vaassen

  3. Via Vivaldi 2, Genova, 16126, Italy

    Renata Paola Dameri

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Franceschetti, B.M., Koschtial, C., Felden, C. (2013). Break-Up Analysis: A Method to Regain Trust in Business Transactions. In: Mancini, D., Vaassen, E., Dameri, R. (eds) Accounting Information Systems for Decision Making. Lecture Notes in Information Systems and Organisation, vol 3. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-35761-9_12

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