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Integrating cognitive mapping and MCDA for bankruptcy prediction in small- and medium-sized enterprises

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Journal of the Operational Research Society

Abstract

The 2008 global financial crisis and its aftermath have shown the ability to predict bankruptcy to be a vital management skill and that the methodologies used for that purpose should be as close to reality as possible. This study aims to develop a multiple criteria system to predict bankruptcy in small- and medium-sized enterprises (SMEs). It combines cognitive mapping with the measuring attractiveness by a categorical based evaluation technique (MACBETH), resulting in a more complete and transparent process for evaluating SMEs and their risk of bankruptcy. What differentiates this framework is the fact that it is based on information obtained directly from managers and bank analysts who deal with this type of adversity on a daily basis. The results highlight the importance of financial and strategic aspects, among others, and demonstrate how cognitive mapping can improve the understanding of the decision situation at hand, while MACBETH facilitates the calculation of trade-offs among evaluation criteria.

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Source: Ensslin et al (2000, adap.)

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Source: Eden (2004: 676)

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Acknowledgements

Records of the expert panel meetings, including pictures, software outputs and non-confidential information of the study, can be obtained from the corresponding author upon request. The authors gratefully acknowledge the outstanding collaboration of the panel members: Filipe Nunes, João Nunes, João Oliveira, José Damião, Paula Cabrera and Rui Pedro Oliveira. Institutional and facility support from the ISCTE Business School, University Institute of Lisbon, Portugal, is also recognized.

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Authors and Affiliations

  1. ISCTE Business School, BRU-IUL, University Institute of Lisbon, Avenida das Forças Armadas, 1649-026, Lisbon, Portugal

    Manuel D. N. T. Oliveira, Fernando A. F. Ferreira & Marjan S. Jalali

  2. Department of Finance, Insurance and Real Estate, Fogelman College of Business and Economics, University of Memphis, Memphis, TN, 38152-3120, USA

    Fernando A. F. Ferreira

  3. Faculty of Economics and Business, University of Oviedo, Avda. Del Cristo s/n, 33007, Oviedo, Spain

    Guillermo O. Pérez-Bustamante Ilander

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  1. Manuel D. N. T. Oliveira
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  2. Fernando A. F. Ferreira
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  3. Guillermo O. Pérez-Bustamante Ilander
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  4. Marjan S. Jalali
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Correspondence to Fernando A. F. Ferreira.

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Oliveira, M.D.N.T., Ferreira, F.A.F., Pérez-Bustamante Ilander, G.O. et al. Integrating cognitive mapping and MCDA for bankruptcy prediction in small- and medium-sized enterprises. J Oper Res Soc 68, 985–997 (2017). https://doi.org/10.1057/s41274-016-0166-3

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