Probability Estimation of Default in the Construction Industry

Student: Antonova Elizaveta

Supervisor: Agata Maximovna Lozinskaia

Faculty: Faculty of Economics, Management, and Business Informatics

Educational Programme: Economics (Bachelor)

Year of Graduation: 2017

This paper examines the impact of various indicators on the default probability in the Russian construction industry. The sample of this study includes 232 companies for 5 years period and 1166 observations at all. Relying on the research experience in this investigation area, it was suggested to build a logit-model based on financial and non-financial indicators and macroeconomic factors. As a result, a negative correlation was found between the company’s default probability in the next year and such indicators as: current ratio, return on costs, real income of citizens compared to the previous period. In turn, a positive relationship was observed between the company’s default probability in the next year and indicators: quick liquidity ratio, return on assets. The area under the ROC-curve was 0.89 which indicates the good quality of the constructed logit-model.

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