Corporate Failure Prediction: An Investigation of PN4 Companies

Abstract

This paper investigates twenty financial ratios to develop a local financial failures prediction model. The study covers the period of 1993‐2001. We used mean and comparison of difference to the data set of fiveyears before the failures to identify the most superlative ratios. From these ratios, we developed two prediction models by using a logistic regression. The results indicae that these models are excellent in predicting financial failures a year before failure. Both models are able to predict financial failure two years before the failures with more than 90 per cent accuracy rate. It is hoped that this study, which is conducted using a recent data can contribute towards existing literatures on corporate failure prediction.

Citation

Adibah Wan Ismail, W., Adzrin Raja Ahmad, R., Anuar Kamarudin, K. and Yahaya, R. (2005), "Corporate Failure Prediction: An Investigation of PN4 Companies", Journal of Financial Reporting and Accounting, Vol. 3 No. 1, pp. 1-16. https://doi.org/10.1108/19852510580000334