BUSINESS FAILURE PREDICTION USING CART-BASED MODEL: A CASE OF SLOVAK COMPANIES
BUSINESS FAILURE PREDICTION USING CART-BASED MODEL: A CASE OF SLOVAK COMPANIES

Summary/Abstract: Over the last decades, many financial distress prediction models have been created all over the world. Usually, these models are not very useful for Slovak companies because of their lower accuracy. The main aim of the paper is to create a business failure prediction model for the companies in Slovakia. To achieve it, we use the financial data of more than100,000 real companies, covering the year 2016 and 2017, operating in the Slovak national economic conditions. Realizing the CART algorithm, the most significant predictors of the company prosperity are identified and the final model is formed. This model achieves 92%overall classification ability. Obtained results are important for companies themselves, but also for their business partners, to eliminate financial and other corporate risks related to the business failure situation of the companies.

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