Transformations  in
Business & Economics

INSOLVENCY PREDICTION TOOLS FOR MIDDLE AND LARGE SCALE ROMANIAN ENTERPRISES
Ovidiu Megan, Cristina Circa

ABSTRACT.Recently a high number of Romanian companies have filed for insolvency, whereas financial distress has firstly hit small- and middle-sized enterprises and then migrated to middle- and large scale companies. In this context, the article aims at identifying an insolvency prediction model, suitable for Romanian middle- and large scale companies. The model was developed on the basis of a sample of 80 Romanian large scale enterprises, having financial difficulties. The main outcome of our research refers to identifying the fact that the probability that a company becomes insolvent raises as its turnover decreases, and its debt and uncollected receivables increase. We were additionally able to build a hierarchy of the independent variables, where the most significant variable in predicting insolvency proved to be the amount of uncollected receivables, followed by the debt and finally by the business scale of the enterprise.

KEYWORDS: : insolvency, financial distress, Logit model, Probit model, Romania.

JEL classification: M41, C53.