The Impact of Methodology on the Effectiveness of Bankruptcy Modeling

Authors: Michal Karas, Mária Režňáková

Abstract: The prevailing opinion in literature is that the accuracy of bankruptcy models cannot be appreciably improved by the choice of classification algorithm. A reflection of this conviction is the frequent usage of parametric methods. However, the nature of financial data places a limitation on the accuracy of these methods. An analysis of 1908 Czech industrial enterprises from 2004 to 2011 reveals that a nonparametric method, if used for the selection of model variables as well as the actual classification, can yield significantly better results than the traditional parametric approach.

Pages: 28-31

DOI: 10.46300/9103.2022.10.4

International Journal of Economics and Statistics, E-ISSN: 2309-0685, Volume 10, 2022, Art. #4