ID: 17437
Authors:
Orlando Mansur Pereira, Walter Lee Ness Jr..
Source:
Revista de Administração Contemporânea, v. 8, n. 3, p. 143-166, July-September, 2004. 24 page(s).
Keyword:
bankruptcy prediction models , e-business , internet , logit regression , statistical modeling
Document type: Article (Portuguese)
Show Abstract
This study
proposes a binomial logit model to estimate the probability of an event
of bankruptcy for Internet companies, i.e. companies dependent on
e-business. Sixty-one American companies were selected and divided into
two samples: 25, which had filed for petition under the US Bankruptcy
Code, between 1999 and 2001, and 36, which had not, for the same period.
A training sample was randomly selected to determine the model
variables and parameters and a holdout sample has confirmed its high
accuracy by correctly classifying 95.1% of the total sample of 61
companies, based on annual financial statements as of one year before
the bankruptcy's occurrence; and 88.1%, as of two years prior to the
same event. Then, the e-Score Model reveals to be very
significant by using only three variables, of 63 first analyzed: (i)
INT/TL: Interest Expense (Income) to Total Liabilities; (ii)
R&D/EMP: Research & Development Expenses to Number of Employees;
e (iii) OCF/CL: Operating Cash Flow to Current Liabilities. While (i)
and (iii) can be obtained from conventional financial statements, (ii)
is innovative, indicating the company which invests in R&D on a per
employee basis has a greater chance of survival. In contrast, companies
presenting relatively high Net Interest Expenses and low Operating Cash
Flow have less chance for survival.