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The Effects of Performance Ratios in Predicting Corporate Bankruptcy: The Italian Case

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Book cover Decision Support Systems V – Big Data Analytics for Decision Making (ICDSST 2015)

Part of the book series: Lecture Notes in Business Information Processing ((LNBIP,volume 216))

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Abstract

Corporate failure prediction is a mayor issue in today’s economy. Any prediction technique must be reliable (good recognition rate, sensitivity and specificity), robust and able to give predictions with a sufficient time lag to allow for corrective actions. In this paper we have considered the case of Small-Medium Enterprises (SMEs) in Italy trying to determine which dimension, in terms of performance indicators, best suits this goal. We have considered three of the most robust and diffused classification techniques on data over a period of 8 years prior to failure. The results tend to suggest that, for the Italian SME system, profitability ratios are always relevant in predicting corporate failure (both in the short and in the medium-long run), while leverage and liquidity indicators, affecting the financial dimension of the company, tend to add information in predicting a possible risk of default only in the medium-long run.

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Authors and Affiliations

  1. Unint - Università degli Studi Internazionali di Roma, Via Cristoforo Colombo 200, 00145, Rome, Italy

    Francesca di Donato & Luciano Nieddu

Authors
  1. Francesca di Donato
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  2. Luciano Nieddu
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Corresponding author

Correspondence to Luciano Nieddu .

Editor information

Editors and Affiliations

  1. University of Belgrade, Belgrade, Serbia

    Boris Delibašić

  2. University of Liverpool, Liverpool, United Kingdom

    Jorge E. Hernández

  3. University of Macedonia, Thessaloniki, Greece

    Jason Papathanasiou

  4. SimTech Simulation Technology, Graz, Austria

    Fátima Dargam

  5. Toulouse 1 Capitole University, Toulouse, France

    Pascale Zaraté

  6. UNINOVA – CA3, Lisbon, Portugal

    Rita Ribeiro

  7. University of Plymouth, Plymouth, United Kingdom

    Shaofeng Liu

  8. University of Namur, Namur, Belgium

    Isabelle Linden

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di Donato, F., Nieddu, L. (2015). The Effects of Performance Ratios in Predicting Corporate Bankruptcy: The Italian Case. In: Delibašić, B., et al. Decision Support Systems V – Big Data Analytics for Decision Making. ICDSST 2015. Lecture Notes in Business Information Processing, vol 216. Springer, Cham. https://doi.org/10.1007/978-3-319-18533-0_6

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  • DOI: https://doi.org/10.1007/978-3-319-18533-0_6

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  • Publisher Name: Springer, Cham

  • Print ISBN: 978-3-319-18532-3

  • Online ISBN: 978-3-319-18533-0

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