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EVALUATION OF THE QUALITY OF MODELS FOR FORECASTING THE LOSS OF SOLVENCY OF SMALL AND MEDIUM ENTERPRISES

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PDF: Author(s): Kobyletskyi V. R.,
Number of journal: 1(50) Date: February 2020
Annotation:

The article analyzes the adequacy of assessment of the probability of bankruptcy and loss of solvency of Russian small and medium enterprises in the case of application of the generally accepted methods of bankruptcy forecasting, namely the models of Altman, Saifulin and Kadykov, of the State Economic Academy (Irkutsk), and Springate. The result was obtained, which contradicts the generally accepted opinion about high adequacy of such methods. It was found out that these models give poor quality estimate. Estimates are either overly optimistic or overly pessimistic in relation to the enterprises which belong to different groups according to the criterion of serious unsolvency problems in the next year after reporting date. For example, the Altman five-factor model for the emerging market countries provides a correct estimate for those enterprises that actually faced unsolvency problems in the year following the year of analysis in 75% of cases, but for those small and medium-sized enterprises that did not face such problems, a false estimate of a high probability of bankruptcy is observed in 73.47% of cases. The opposite is true for the State Economic Academy model (Irkutsk). In this case, the assessment of companies that actually faced unsolvency problems in the year following the year of analysis is overly optimistic. The result is also unsatisfactory for enterprises that were able to meet their obligations in time in the year following the year of analysis. It is pointed out that further development requires a qualitative method of evaluation of probability of bankruptcy and loss of solvency by Russian small and medium enterprises.

Keywords:

bankruptcy forecast, risk of losing solvency, quality of forecast models, adequacy of risk assessment, adequacy of bankruptcy models, bankruptcy risk analysis, bankruptcy of small enterprises, bankruptcy of medium enterprises, solvency of small enterprises, solvency of medium enterprises.

For citation:

Kobyletskyi V. R. Evaluation of the quality of models for forecasting the loss of solvency of small and medium enterprises. Business. Education. Law, 2020, no. 1, pp. 298–301. DOI: 10.25683/VOLBI.2020.50.174.