Complete analysis of bankruptcy syndrome using grey systems theory

Abstract

Purpose

The purpose of this paper is to realise a complete analysis at the company level using grey systems theory for shaping the relations among variables.

Design/methodology/approach

Starting from the symptoms that can be identified and moving forward to causes that determine a specific stage in a company's development and long‐term survival, all the aspects that can appear and affect a company's performance and bankruptcy are taken into account. Also, due to the fact that all the activities that took place in a company are running in an uncertain and a continually changing environment, grey systems theory was chosen to better shape the relations among the implied variables. Even when referring to a company's diagnosis or to its prediction, the involved aspects are presented and depicted. A numeric example is also computed in the last part of the paper.

Findings

The results are convincing: not only that the diagnosis of the company can show the main elements, factors that are affecting a company's activity, but even the main identified factors can be used for a prediction on a company's future evolution.

Practical implications

The method exposed in the paper can be used by any company for realising the diagnosis of the actual stage in which a firm could be situated and even for making further predictions regarding its evolution.

Originality/value

The paper succeeds in realising both diagnosis and prediction of a firm's current and future stage by using one of the newest developed theories: grey systems theory.

Citation

Scarlat, E. and Delcea, C. (2011), "Complete analysis of bankruptcy syndrome using grey systems theory", Grey Systems: Theory and Application, Vol. 1 No. 1, pp. 19-32. https://doi.org/10.1108/20439371111106704