Discriminatory Methods as a Tool for Assessment of Bankruptcy Risk
Journal Title: Zarządzanie i Finanse - Year 2013, Vol 11, Issue 4
Abstract
In the reference literature, an afflicting trend is noticed to "fetishize" meth-ods assessing the financial standing of a company, in particular the discrimina-tory methods. The value of timeless and sectoral (industrial) universality is at-tributed to the methods in an unauthorized manner from the methodological point of view. Still it is persistently recommended to use in the Polish conditions the methods assessed in other countries, especially Edward Altman’s method (published 45 years ago) and its various modifications. This article attempts to evaluate synthetically the state of research, in the domestic reference literature, on the discriminatory methods in evaluating the financial standing and the risk of business bankruptcy. The study takes into account the methodological views and conclusions emerging from the empirical research on the level of reliability of discrimination models according to the criterion of the number of variables, the degree of considering the industrial specificity of the analysed business, conditions of its activities, the size of the company (particularly in case of SMEs) and the reten-tion period of values credibility. Critically, the reference is made to methodically incorrect use of foreign discriminatory models in the Polish conditions and not taking into account the industrial specificity of the tested company. The conducted discussion has confirmed the validity of the thesis formu-lated by E. Mączyńska and M. Zawadzki that "there is not one and only right best business model for assessing the bankruptcy risk for a business."
Authors and Affiliations
Jerzy Kitowski
Keywords
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