Title: Mixed logistic model with two independent random coefficients for financial crisis prediction: Argentinean companies

Authors: Norma Patricia Caro; Margarita Diaz; Fernando Garcia; Marcela Porporato

Addresses: Centro de Investigaciones en Ciencias Económicas, CIECS UNC-CONICET, Facultad de Ciencias Económicas, Universidad Nacional de Córdoba (Argentina), Ciudad de Valparaíso s/n. Ciudad Universitaria, Córdoba, CP: X5000HRV, Argentina ' Centro de Investigaciones en Ciencias Económicas, CIECS UNC-CONICET, Facultad de Ciencias Económicas, Universidad Nacional de Córdoba (Argentina), Ciudad de Valparaíso s/n. Ciudad Universitaria, Córdoba, CP: X5000HRV, Argentina ' Centro de Investigaciones en Ciencias Económicas, CIECS UNC-CONICET, Facultad de Ciencias Económicas, Universidad Nacional de Córdoba (Argentina), Ciudad de Valparaíso s/n. Ciudad Universitaria, Córdoba, CP: X5000HRV, Argentina ' School of Administrative Studies, York University, Room 282, Atkinson College Building, 4700 Keele St., Toronto, ON M3J 1P3, Canada

Abstract: The paper develops a mixed logistic financial distress prediction model with two independent random coefficients and validates it for public Argentinean companies. This study complements existing literature on bankruptcy prediction in emerging economies advancing the application of contemporary econometric methods (Caro et al., 2013). Anticipating bankruptcy risks increases portfolios' profitability. Emerging economies and frontier markets differ from developed economies in political, cultural, social and institutional terms. Given those differences, investors and lenders need specific bankruptcy and financial distress prediction models. The model developed achieves an excellent performance using financial statements from firms listed in the Buenos Aires Stock Exchange during 1993-2000 with ratios accepted in the literature (Altman, 1993; Jones and Hensher, 2004). Results show that profitability, assets turnover and cash flow from operations reduce the likelihood of financial distress while leverage increases it for companies operating in a frontier market such as Argentina.

Keywords: mixed logistic model; financial statements; financial ratios; financial distress; bankruptcy prediction; Latin America; Argentina; accounting.

DOI: 10.1504/IJAF.2020.111228

International Journal of Accounting and Finance, 2020 Vol.10 No.1, pp.40 - 63

Accepted: 13 Dec 2019
Published online: 16 Nov 2020 *