Affiliation:
1. Vilniaus Gedimino technikos universitetas, Vilnius, Lietuva
Abstract
Anticipating the likelihood of bankruptcy is essential for every business. Nevertheless, one of the most critical sectors of the economy is the financial sector. The bankruptcy of a company in the financial industry affects both individuals, businesses, and organizations, negatively impacting the economy. Therefore, it is essential to anticipate the likelihood of bankruptcy of companies in the financial sector and make management decisions to avoid the risk of bankruptcy. There are many methodologies for analyzing and predicting corporate bankruptcy that differ in content, number, and accuracy of measurable indicators, so it is crucial to identify which model is most appropriate for assessing the risk of corporate bankruptcy in a particular sector. Given that the financial sector plays a crucial role in economic development and that the consequences of their bankruptcy are harrowing, the aim is to identify the most sensitive model to the risk of bankruptcy in this sector. To achieve this goal, we reveal the concept of bankruptcy, present the internal and external causes of bankruptcy, and systematize the results of bankruptcy risk research of companies in the financial sector. Bankruptcy probability assessment models are also presented and compared, and their applicability to the financial industry is discussed. An analysis of the literature revealed that the most commonly used models for assessing the bankruptcy risk of companies in the financial sector are the Altman Z Index, the Ohlson O Index, and the Zmijewski X Index. After applying these models in the case of three banks (SEB bank, UAB Medicinos bank, and General Financing bank) using 2021. The Altman Z model found that the most sensitive bankruptcy predictor was the probability of bankruptcy.
Publisher
Vilnius Gediminas Technical University
Reference38 articles.
1. A review of bancruptcy and its prediction;Ahmadpour Kasagari, A.;International Journal of Academic Research in Accounting, Finance and Management Science,2013
2. Systematic review of bankruptcy prediction models: Towards a framework for tool selection
3. Validity of Altman Z-Score Model to Predict Financial Failure: Evidence From Jordan
4. THE PREDICTION OF CORPORATE BANKRUPTCY: A DISCRIMINANT ANALYSIS*
5. Financial distress and bankruptcy prediction: Evidence from Ghana;Anisom-Yaansah, F.;Expert Journal of Finance,2016