Identifying failing companies: a reevaluation of the logit, probit and DA approaches

Article Abstract:

A study investigated the determinants of business failures or bankruptcy for a sample of 949 listed UK firms between 1987-1994. In particular, it evaluated the impact of company size, industry sector and economic cycle on the likelihood of bankruptcy. The analysis incorporated tests for omitted variable bias and heteroskedasticity. Profitability, leverage and cash flow have significant effects on the likelihood of bankruptcy. Probit and logit models used in the study were found to perform better than the discriminant analysis method.

Analysis, Bankruptcy, Business failures

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Nonlinear dynamical systems and inventory management

Article Abstract:

Nonlinear dynamical systems must be combined with other analytical methods to be effective in demand forecasting for inventory management. The application of stochastic inventory systems on data with nonlinear complexities, which are very sensitive to changes in initial conditions and model requirements, will result in higher inventory costs. The Brock, Dechert, and Scheinkman (1987) model is used to determine the nonlinear dependence of stochastic systems.

Research, Models, Management, Stochastic systems, Inventories, Demand (Economics), Nonlinear theories

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Decision analysis using multinomial logit models: Mortgage portfolio valuation

Article Abstract:

The valuation of a set of assets in its net present value is presented using multinomial logit models in a decision analysis framework. The analysis framework provides expected monetary value rather than estimators of the firm's financial state. This method can be used in analyzing simultaneous projects in one organization demonstrating that multinomial logit models are useful in improving asset valuation.

Capital assets, Valuation

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