Bankruptcy International Style: What Financial Factors Predict Corporate Bankruptcy in Global Economies

Abstract ( via UC)

In data mining more than a decade’s worth of international bankruptcy records, a UC researcher has identified the company-related factors most likely to lead to bankruptcy in the U.S., U.K. and Japan. Companies in all three countries share only one common risk factor for bankruptcy: Sales turnover.

Introduction (via UC)

The only uniform corporate indicator predicting a firm’s bankruptcy in three of the world’s major economies is a company’s sales turnover.

Other predictive indicators of corporate bankruptcy vary by country and market system, according to University of Cincinnati research to be released on Aug. 4 regarding 23 financial variables associated with corporate bankruptcy from 1995 to 2009. For instance, only in the United States does it appear that a company’s size is a risk factor for bankruptcy. In the U.S., the smaller a company, the greater the apparent risk for bankruptcy.

The research project, Forecasting Corporate Bankruptcy: International Evidence, was conducted by UC’s Yan Yu, associate professor of quantitative analysis and operations management, and Shaonan Tian, UC doctoral student in quantitative analysis.

Yu and Tian will present their findings and the predictive corporate bankruptcy model they have developed at the Joint Statistical Meeting (JSM), the largest gathering of statisticians in North America, to be held in Vancouver July 31-Aug. 5, 2010.

The JSM is held jointly by the American Statistical Association, the International Biometric Society, the Institute of Mathematical Statistics, the Statistical Society of Canada, the International Chinese Statistical Association and the International Indian Statistical Association.

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05. August 2010 by Miguel Barbosa
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