A Review of Bankruptcy Forecasting: Theories, Models, and Techniques

Bankruptcy is an almost ancient and prevalent category. According to the law, bankruptcy means the inability of a business entity to pay its debts. Bankruptcy can be considered from two aspects: bankruptcy from an accounting perspective and bankruptcy from an international law perspective. Bankruptcy prediction models are also proposed. Bankruptcy prediction models are divided into three categories from the point of view of time interval: point models, interval models, and probabilistic models. Of course, different methods for predicting bankruptcy exist, such as ratio analysis and market risk. As mentioned above, various bankruptcy models exist, such as Altman, Springate, Ohlson, Fulmer, Zmijewski, Zavgren, Shirata, etc. This study deals with the theoretical analysis of each of these models. This study aims to present and explain models for predicting bankruptcy. Finally, it can be stated that it does not matter which model and which criterion (financial or non-financial) is used to indicate distress and bankruptcy; the important thing is to use the models for prediction and, consequently, to take the necessary and appropriate policies according to the prevailing conditions in the business unit to prevent and avert this financial event.Bankruptcy is an almost ancient and prevalent category. According to the law, bankruptcy means the inability of a business entity to pay its debts. Bankruptcy can be considered from two aspects: bankruptcy from an accounting perspective and bankruptcy from an international law perspective. Bankruptcy prediction models are also proposed. Bankruptcy prediction models are divided into three categories from the point of view of time interval: point models, interval models, and probabilistic models. Of course, different methods for predicting bankruptcy exist, such as ratio analysis and market risk. As mentioned above, various bankruptcy models exist, such as Altman, Springate, Ohlson, Fulmer, Zmijewski, Zavgren, Shirata, etc. This study deals with the theoretical analysis of each of these models. This study aims to present and explain models for predicting bankruptcy. Finally, it can be stated that it does not matter which model and which criterion (financial or non-financial) is used to indicate distress and bankruptcy; the important thing is to use the models for prediction and, consequently, to take the necessary and appropriate policies according to the prevailing conditions in the business unit to prevent and avert this financial event.

کلیدواژه ها:

Financial crisis patterns ، Bankruptcy models ، Bankruptcy prediction methods ، Ratio analysis and market risk