Bankruptcy prediction in specific economic conditions of Slovakia: Multiple discriminant analysis

Abstract

Copyright © 2018 International Business Information Management Association (IBIMA). The topic of discussion on the suitability of applying foreign financial health prediction models is whether the model formed based on of specific data characterizing businesses in one country can successfully be used to predict the financial situation of businesses in other countries. In the authors' opinion, there are many limitations and differences not only between different countries but also between different sectors within a single country as the models change over the course of time. Therefore, the purpose of the paper is the formation of a model of the corporate financial health of Slovak business entities, using the results of the multiple discriminant analysis on the sample of 105,708 Slovak business entities. The validation of the models by ROC curve proves good classification ability (90.6%) confirming the classification results (successfulness of classification ability for non-prosperous enterprises higher than 88 %). It is evident than the model has been prepared in compliance with the economic conditions of the given country and can be beneficial for all market subjects.