The bankruptcy prediction approach: An empirical study of comparison between the emerging market score model and bankruptcy prediction indicators approach in the Johannesburg Stock Exchange

Journal of Economic and Financial Sciences


 
 
Field Value
 
Title The bankruptcy prediction approach: An empirical study of comparison between the emerging market score model and bankruptcy prediction indicators approach in the Johannesburg Stock Exchange
 
Creator Cassim, Ronel J. Swanepoel, Matthys J.
 
Subject Bankruptcy prediction indicator approach; Bankruptcy; Company failure; Emerging Market Score model approach; Financial distress; South African context
Description Orientation: The effective and timely bankruptcy prediction is crucial to the survival of companies. In order to attain a desired result an effective bankruptcy prediction tool needs to be applied within a South African context.Research purpose: The aim of this study was to determine whether bankruptcy could have been predicted within the 5 years prior to failure for the study period between 2016 and 2018.Motivation for the study: Most of the bankruptcy prediction studies in South Africa are industry- or sector-based, not many studies are found to be generic, easy to use and apply, and thus one model is applied for different industries or sectors.Research approach/design and method: From the population, the total sample consists of five companies within four different sectors, such as industrial, construction, retail, and personal and household sectors. Financial indicators (financial ratios) were obtained for both the BPIA and EMS from the INET (a South African supplier of quality financial data) McGregor BFA database, a JSE portal. A mixed-method research approach was applied by making use of a qualitative and quantitative methodology.Main findings: The findings revealed that the BPIA is an effective and reliable analytical tool to predict or detect the bankruptcy of South African companies.Practical/managerial implications: Based on the finding of the study companies within diverse industries should apply the BPIA regularly and take remedial action significantly to improve their financial well-being.Contribution/value add: The study has identified the BPIA has a better prediction accuracy than the renowned EMS model in South African context.
 
Publisher AOSIS
 
Contributor
Date 2021-01-29
 
Type info:eu-repo/semantics/article info:eu-repo/semantics/publishedVersion —
Format text/html application/epub+zip text/xml application/pdf
Identifier 10.4102/jef.v14i1.539
 
Source Journal of Economic and Financial Sciences; Vol 14, No 1 (2021); 8 pages 2312-2803 1995-7076
 
Language eng
 
Relation https://jefjournal.org.za/index.php/jef/article/view/539/1141 https://jefjournal.org.za/index.php/jef/article/view/539/1140 https://jefjournal.org.za/index.php/jef/article/view/539/1142 https://jefjournal.org.za/index.php/jef/article/view/539/1139
 
Rights https://creativecommons.org/licenses/by/4.0