Industrija 2/2011 - Ekonomski institut

I n d u s t r i j a 2 / 2 0 1 1 .
profit; GP – gross profit; SP – profit from sales; OP – operational profit; INT –
paid interest from credits; INV – inventories; OC – operational cost; DEP
depreciation.
Despite the major statistical advancements that occurred in this area in the last
two decades, MDA still remains the most popular and most widely used failure
prediction technique, maybe due to the fact that its Type I error is acceptable low
compared with alternative and more complex techniques (Charitou et al, 2004).
([9], p.300)
2. SANDIN & PORPORATO’S MODEL
Developing countries are attracting more foreign investment than ever before.
([11], p.75) As many authors argue, traditional techniques or models do not
provide much guidance on how they should be applied to emerging markets
(Pereiro, 2006) ([9], p.298) The emerging capital markets cannot be seen in the
same way as developed. This is partly due to their greater volatility and
significant deviations from normal distributions of returns, and also because of
issues of non-synchronous trading. [8]. In [7] it is shown that capital market does
not have a significant importance for Serbian companies. Many studies show
that the legality of the developed capital markets is not valid in the Serbian
capital market. Namely, the level of market liquidity is persistently low in Serbia.
Additionally, results confirm that time-varying illiquidity and its volatility is highly
unstable in this market. ([13] For example, research of Radivojević et al. [8]
points out the limitations of the application of modern portfolio theory in the
Serbian capital market while research [6] points out the unreliability of the
application of the CAPM model.
Ariel Sandin and Marcela Porporato developed a model of bankruptcy prediction
using the multiple discriminant analysis technique for Argentinean companies in
the decade of the 1990s. The original aim was to develop a classification
method that could be easily and freely used by all investors and creditors in
Argentinean companies. Model creators suggest that their model can be used to
assist investors, creditors, and regulators in Argentina and other emerging
economies to predict business failure.
The model is built based on examination financial profiles of 22 companies, 11
of them met the definition of bankruptcy and the other 11 were in healthy
condition. The assets of bankrupt companies ranged from US$3 to 77 million
and the assets of healthy companies ranged from US$8 to 68 million in the
fourth year before the base year. Although the sample is small, it is large in
comparison to previous studies, given the population it represents. The 22 firms
represented almost 20 percent of all actively traded firms in the 1990s.
In general, ratios measuring profitability, liquidity, and solvency prevailed as the
most significant indicators. The order of their importance is not clear since
almost every study cited a different ratio as being the most effective indication of
impending problems. ([1], p.4)
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