Influence of the Presence of Affiliated Parties on Probability of Russian Companies' Bankrupcy

Small and medium-sized businesses in Russia operate in special conditions other than Western ones, therefore, bankruptcy prediction models for this sector should take into account indicators reflecting the specifics of its activities. One of these indicators is the presence in the management of enterprises of persons affiliated with the authorities, which can have an impact on the financial condition of companies and the risk of bankruptcy. In addition, industry specificity of companies plays a significant role in predicting the likelihood of bankruptcy of a potential borrower. The main goal of this paper is to find out whether relations with the authorities affect the probability of the bankruptcy of a company. In the first part of this paper we will analyze existing methods for assessing the probability of bankruptcy. The second part is devoted to a sample choice, building of a model, which will include a number of quantitative and qualitative indicators reflecting the company's activities taking into account industry specifics, as well as a parameter responsible for the presence of affiliated parties. The third part shows the results obtained from the analysis.