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Forecasting the Probability of Bankruptcy of the Enterprises of Small and Average Business

ФИО студента: Volkova Ilona

Руководитель: Natalia Vladimirovna Maksimova

Кампус/факультет: Faculty of Economics

Программа: Finance (Master)

Год защиты: 2019

Diagnosing the probability of bankruptcy is a very important process, which is of paramount importance in modern conditions. The fact is that the financing of enterprises is carried out mainly at the expense of borrowed funds, respectively, it is extremely important for investors and creditors to correctly assess the degree of risk of investments and the probability of losses. In addition, early identification of a crisis situation (approaching insolvency), taking into account all the risks associated with it, can turn the situation in favor of the enterprise by means of formation and adoption of a competent economic or managerial decision and the application of preventive measures. The purpose of this work is to collect and systematize data on the features of methods for predicting the probability of bankruptcy of enterprises, as well as the development of methods for predicting the probability of bankruptcy of enterprises and testing the resulting methods on the example of Russian, Italian and European small and medium-sized companies. In accordance with this goal, a number of tasks were set and performed within the framework of the study: • definition of the phenomenon of bankruptcy, the purpose and problems of its forecasting; • analysis and comparison of options for predicting the probability of bankruptcy of enterprises proposed in the spescial literature and in practice; • development of a model that can predict the probability of bankruptcy with an accuracy of at least 75 percent; • approbation of the obtained model of forecasting the probability of bankruptcy of enterprises on the example of small and medium-sized businesses operating in Russia, Italy and Europe. In this paper, the methods of predicting the probability of bankruptcy by means of analysis and systematization of information provided in the information sources of the Russian Federation and the Italian Republic, as well as in the articles of Russian and foreign researchers were considered. In addition, an analysis was conducted of the financial statements and key financial indicators characterizing the activity of 20 789 enterprises of small and average business of Russia, 20 532 enterprises small and medium business in Italy and 38 848 enterprises of small and medium business in Europe, the data of which was used for testing the developed models of diagnostics of probability of enterprise's bankruptcy. On the basis of the information obtained in the theoretical part, the practical part of the work was performed, namely: • predictors were identified that best describe the financial condition of the enterprise and its resilience to crisis situations; • the models of bankruptcy forecasting were proposed, which are rationally applied for 1, 2 and 3 years before the probable bankruptcy, as well as on the basis of the forecasted strength, the preferred ones were chosen; • was tested recommended logit model to evaluate the likely risk of bankruptcy of the enterprise to test the hypotheses, resulting in the following conclusions:  when predicting the probability of bankruptcy of an enterprise in different time horizons, it is more efficient to use different models;  the model of forecasting the probability of bankruptcy of an enterprise for 1 year before bankruptcy contains indicators that characterize to a greater extent the business activity of the enterprise than its solvency;  the further an enterprise is from the date of probable bankruptcy, the more external users are interested in its solvency;  the best way to make a forecast for the time period of 3 years before the probable bankruptcy is to take into account not only the indicators of business activity and debt burden, but also solvency;  "bloated" labor composition can adversely affect the efficient use of financial resources of the company; predictors included in the national model to predict the probability of bankruptcy, differ from predictors in the model for Europe and better describe the causes of bankruptcy;  the European model of forecasting the probability of bankruptcy is able to give qualitative forecasts for all European countries.

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