Determinants factors in predicting the financial crisis in argentine companies

Abstract

Since the mid-twentieth century has been special emphasis on business failure, which can be detected through the behavior of companies, whose manifestations are reflected in their accounting information. Preliminary studies using cross-sectional methodology, it does not incorporate the longitudinal side of the data. Due to the availability of various periods balances for each company and the development of advanced statistical methods for longitudinal data, in the 2000s the so-called mixed models to predict the financial crisis were applied. In order to prevent negative situations, taking appropriate decisions, in this study the risk of financial crisis in companies in Argentina in two scenarios of economic stability (1993 - 2000 and 2003-2010) is evaluated. In this way it helps to identify the determinants of the crisis of the companies listed on Stock Exchange of Buenos Aires. The ratios that measure profitability and cash position explains the higher proportion of heterogeneity induced by the correlated data, which justifies its inclusion as random coefficients. The index of profitability, operating cash flow, turnover and leverage ratio are the indicators most predictive ability of the financial crisis. Correct classification rates are higher when models are applied to longitudinal data instead the cross-sectional models.