Corporate prediction models, ratios or regression analysis?

E.J. Bijnen, M.F.C.M. Wijn

Research output: Book/ReportReport

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Abstract

The models developed in the literature with respect to the prediction of a company s failure are based on ratios. It has been shown before that these models should be rejected on theoretical grounds. Our study of industrial companies in the Netherlands shows that the ratios which are used in insolvency models do not have the predicting properties they are credited with. We have investigated whether the alternative for ratios mentioned in the literature, i.e. the regression analysis, gives reliable insolvency models. However, the regression analysis appears to be useful in a limited sense only, depending on the size of the company.
Original languageEnglish
PublisherUnknown Publisher
Number of pages23
VolumeFEW 658
Publication statusPublished - 1994

Publication series

NameResearch memorandum / Tilburg University, Department of Economics
VolumeFEW 658

Keywords

  • Regression Analysis
  • Corporate Models
  • Corporate Performance
  • management science

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