TITLE

Predicting Business Failures in Canada

AUTHOR(S)

Boritz, J. Efrim; Kennedy, Duane B.; Sun, Jerry Y.

PUB. DATE

May 2007

SOURCE

Accounting Perspectives;2007, Vol. 6 Issue 2, p141

SOURCE TYPE

Academic Journal

DOC. TYPE

Article

ABSTRACT

Empirical researchers and practitioners frequently use the bankruptcy prediction models developed by Altman (1968) and Ohlson (1980). This poses a potential problem for practitioners in Canada and researchers working with Canadian data because the Altman and Ohlson models were developed using U.S. data. We compare Canadian bankruptcy prediction models developed by Springate (1978), Altman and Levallee (1980), and Legault and V�ronneau (1986) against the Altman and Ohlson models using recent data to determine the robustness of all models over time and the applicability of the Altman and Ohlson models to the Canadian environment. Our results indicate that the models developed by Springate (1978) and Legault and V�ronrieau (1986) yield similar results to the Ohlson (1980) model while being simpler and requiring less data. The Altman (1968) and Altman and Levallee (1980) models generally have lower performance than the other models. All models have stronger performance with the original coefficients than with re-estimated coefficients. Our results regarding the Altman and Ohlson models are consistent with Begley, Ming, and Watts (1996), who found that the original version of the Ohison model is superior to the Altman model and is robust over time.

ACCESSION #

26258270

Tags: BANKRUPTCY;  BUSINESS failures;  FINANCIAL crises;  DEFAULT (Finance)

 

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