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Finance and Credit
 

Assessing the efficiency of enterprise bankruptcy prediction on the basis of the Russian legislation

Vol. 23, Iss. 13, APRIL 2017

PDF  Article PDF Version

Received: 21 December 2016

Received in revised form: 17 January 2017

Accepted: 31 January 2017

Available online: 16 April 2017

Subject Heading: Financial system

JEL Classification: С15, D24

Pages: 732-746

https://doi.org/10.24891/fc.23.13.732

Fedorova E.A. Financial University under Government of Russian Federation, Moscow, Russian Federation
ecolena@mail.ru

Chukhlantseva M.A. Higher School of Economics, Moscow, Russian Federation
chukhlantseva_maria@mail.ru

Chekrizov D.V. ZAO GlobalTel, Moscow, Russian Federation
CHEKrizovDV@mail.ru

Subject The article addresses the problem of predicting the probability of bankruptcy of Russian enterprises and studies the Russian legislation on the bankruptcy of economic actors, namely, commercial enterprises operating in the Russian Federation.
Objectives The aim of this work is to evaluate the efficiency of predicting the likelihood of bankruptcy based on effective legislation.
Methods We apply a method of constructing a standard logistic regression model. The method helped us to select factors affecting the enterprise bankruptcy. The paper evaluates the predictive capability of 6 models with different sets of financial ratios by building a logistic regression for each selected industry individually.
Results We compare the predictive power of models constructed on the basis of six different sets of financial ratios, three of which were designed subject to Russian regulations on insolvency (bankruptcy). The hypothesis, according to which the financials that are approved by legislative acts of the Russian Federation provide the highest predictive power of the models than the coefficients of classical models, or those that are frequently used in studies on bankruptcy prediction, was not confirmed. However, the study of 'legislative' models showed an improvement in the quality of legislative acts of the Russian Federation over time (an increase in predictive power by a few percentage points).
Conclusions The findings will enable company managers, shareholders, potential investors and other stakeholders to monitor company's current situation and forecast its bankruptcy.

Keywords: bankruptcy, legislation, predictive power

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