The prediction of corporate failure: Testing the Australian experience

Castagna, A; Matolcsy, ZP

The prediction of corporate failure: Testing the Australian experience

Castagna, A Matolcsy, ZP

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Publisher:: Australian Graduate School of Management
Publication Type:: Journal Article
Citation:: Australian Journal of Management, 1981, 6 (1), pp. 23 - 50
Issue Date:: 1981-01

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Field	Value	Language
dc.contributor.author	Castagna, A	en_US
dc.contributor.author	Matolcsy, ZP https://orcid.org/0000-0001-6566-5079	en_US
dc.date.issued	1981-01	en_US
dc.identifier.citation	Australian Journal of Management, 1981, 6 (1), pp. 23 - 50	en_US
dc.identifier.issn	0312-8962	en_US
dc.identifier.uri	http://hdl.handle.net/10453/13999
dc.description.abstract	The purpose of this paper is to address some of the methodological issues which have evolved from the literature on corporate failures, and to report the results of an empirical investigation on the usefulness of financial models for the prediction of corporate failures. The experimental design is based on the 21 listed public companies that failed in Australia during the period 1963 to 1977, inclusive, and which met with minimum data requirements. It examines the performance of linear versus quadratic classification rules; temporal versus atemporal models; equal versus unequal priors of failure, variable dimension reduction, and a validation test proposed by Lachenbruch (1967). The results of the study suggest that it is difficult to identify a unique model to predict corporate failures, without specifying the utility preference of the user. Utility preference in this context refers to the minimization of either Type I, Type II, or the overall error rate of a failure model.	en_US
dc.publisher	Australian Graduate School of Management	en_US
dc.relation.ispartof	Australian Journal of Management	en_US
dc.title	The prediction of corporate failure: Testing the Australian experience	en_US
dc.type	Journal Article
utslib.citation.volume	1	en_US
utslib.citation.volume	6	en_US
utslib.for	150303 Corporate Governance and Stakeholder Engagement	en_US
utslib.for	150103 Financial Accounting	en_US
utslib.for	15 Commerce, Management, Tourism and Services	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
utslib.copyright.status	closed_access
pubs.consider-herdc	false	en_US
pubs.issue	1	en_US
pubs.volume	6	en_US

Abstract:

The purpose of this paper is to address some of the methodological issues which have evolved from the literature on corporate failures, and to report the results of an empirical investigation on the usefulness of financial models for the prediction of corporate failures. The experimental design is based on the 21 listed public companies that failed in Australia during the period 1963 to 1977, inclusive, and which met with minimum data requirements. It examines the performance of linear versus quadratic classification rules; temporal versus atemporal models; equal versus unequal priors of failure, variable dimension reduction, and a validation test proposed by Lachenbruch (1967). The results of the study suggest that it is difficult to identify a unique model to predict corporate failures, without specifying the utility preference of the user. Utility preference in this context refers to the minimization of either Type I, Type II, or the overall error rate of a failure model.

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10453/13999