Predicting Corporate Failure
Meena Sharma and Vandna Saini
- University Business School, Panjab University, Chandigarh, Punjab
- SUS college of Research and Technology, Tangori, Punjab
Corporate failure is a serious problem being
confronted by the corporate world. This issue
has been a subject of intensive research and
discussion by economists, bankers, creditors,
equity shareholders, accountants, marketing
and management experts. The present study
aims at developing a model for prediction
of corporate failure on the basis of financial
ratios. The study is based on the data of
selected firms from chemical industry (with
equal number of failed and non failed firms).
The discriminant analysis has been used to
discriminate between failed and non failed
firms. It is concluded that some of the
financial ratios can significantly differentiate
between failed and non failed firms. The
finding will be useful for the banks and other
financial institutions in designing a suitable
credit appraisal and monitoring system for their
loans. This model could guide the policy makers
to prepare an early warning system to avoid
Corporate Failure, Distress
Analysis, Financial Ratios, Discriminate
Analysis, Credit Analysis and Appraisal
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