G33 - Bankruptcy; LiquidationReturn

Bankruptcy models are a common tool of financial analysis to predict the financial distress of companies. However, in the recent years, the instability and risk of the overall economic environment have underlined the need for accurate tools to predict bankruptcy and assess the overall performance of companies. In this article, we analyze the ex-ante predictive ability of selected bankruptcy and solvency models commonly used in financial analysis: Kralicek quick test, Taffler model, the IN99 and IN05 indexes, and Altman Z'-score models in the case of Czech companies from 2007 to 2012. We determined the percentage of cases when these models correctly predicted failures of companies up to five years in advance, and found that the IN05 and IN99 credibility indexes provided the best results, as well as the Altman Z'-score model. However, the predictive ability of the Taffler model and Kralicek quicktest has only been limited.

The survey of real outcomes of insolvency proceedings in the Czech Republic analysed by this study took place during 2012 and 2013. This is the first survey that enables (on the basis of a statistically declarative sample) the ascertainment of certain crucial data as to the actual outcome of insolvency proceedings in the Czech Republic, i.e. especially as to the yields which creditors obtain. The study analysis outcomes drawn from two waves of statistical research, compare these two waves together and place the results gained into an international context. In addition, the study also brings forward basic information on the structure of the insolvency act in the Czech Republic and possible changes in legislation that would create a more congenial environment for creditors.