Influence of Financial and Non-financial Factors on the Probability of Bankruptcy

Student: Chumakov Nikita

Faculty: International College of Economics and Finance

Educational Programme: Double degree programme in Economics of the NRU HSE and the University of London (Bachelor)

Year of Graduation: 2021

Aim of this study was to outline the most relevant factors for bankruptcy forecasting. This work applies OLS LASSO method and forward stepwise approach with logit regression in order to determine significant variables. The sample included 4043 observation of primarily the US public companies for the period 2016-2020. Out of initial 28 covariates, 4 most relevant factors were chosen, by comparing output of 2 models. The most significant effect on bankruptcy prediction comes from macroeconomic variables and variables, which stand for liquidity and leverage sides of a firm. Both market-based and accounting variables entered final versions of the models, which proves significance of both types factors. No statistical method was found to be significantly more accurate in bankruptcy prediction, than another.

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