Journal of Finance and Economics

Journal of Finance and Economics

ISSN: 2291-4951 (Print)    ISSN: 2291-496X (Online)

Volume 1 (2013), No. 3, Pages 1-26

DOI: 10.12735/jfe.v1i3p01

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International Applicability of Corporate Failure Risk Models Based on Financial Statement Information: Comparisons across European Countries

Erkki K. Laitinen1  Arto Suvas1 

1University of Vaasa, Vaasa, Finland

URL: http://dx.doi.org/10.12735/jfe.v1i3p01Citations: 10 (Details)

To Cite this Article     Article Views: 550     Downloads: 362  Since January, 2015

Abstract

The objective of the study is, firstly, to analyse the predictability of financial distress in different European countries. Secondly, the objective is to compare predictability across countries. Thirdly, the objective is to investigate possibilities to develop a generic uniform model to predict distress in each country over Europe. The sample includes over one million active and tens of thousands financially distressed firms from 30 European countries. For each country, a prediction model of its own is estimated. The models and their performance in prediction accuracy are compared across countries. Finally, a uniform generic model is estimated for the sample including all countries and its prediction accuracy is assessed by country. The results show that there are differences in the form and strength of prediction models across different European countries. However, it is possible to develop a uniform generic model resulting in a reasonably high rate of classification accuracy for most countries.

JEL Classifications: G15, G32, G33

Keywords: financial distress, bankruptcy, credit risk, failure prediction, international comparison, European countries

To Cite this Article: Laitinen, E. K., & Suvas, A. (2013). International applicability of corporate failure risk models based on financial statement information: comparisons across European countries. Journal of Finance and Economics, 1(3), 1-26. http://dx.doi.org/10.12735/jfe.v1i3p01

Copyright © Erkki K. Laitinen & Arto Suvas

Creative Commons License
This article is published under license to Science and Education Centre of North America. This is an Open Access article distributed under the terms of the Creative Commons Attribution 4.0 International License.

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International Applicability of Corporate Failure Risk Models Based on Financial Statement Information: Comparisons across European Countries
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