Models to Valuating the Risk of Insolvency to Open Spanish Companies

Abstract

   The objective of this study is to analysis the economic-financial characteristics of a sample of open Spanish industrial companies made up of some which had financial difficulties and others considered solvent, with the aim of building prediction models of companies' crises. The statistics techniques used are Discriminant Analysis and Logistic Analysis. Both methods give a high percentage of accuracy in the companies’ classification, being in the region of 95% from the year prior to failure and 80% accuracy from the second year previous. The Logit model gave slightly more accurate results than the Discriminant Model, even though the Discriminant Model proved more accurate with the validation tests, maintaining the same percentages in its estimation accuracy. The ratios selected for the models as the best variables for explaining failure were: the economic profitability and the generation of resources. From this, the study allowed a characteristic profile to be outlined of Spanish companies which are passing through problems of insolvency.