The Bankruptcy Prediction Model Scorem For Italian Manufacturing Listed Companies: A Comprehensive Guide

Predicting bankruptcy is a crucial task for investors, creditors, and policymakers. In recent years, several bankruptcy prediction models have been developed, each with its strengths and weaknesses. One of the most widely used models is the Scorem model, developed by Italian economists Fulvio Marzo and Stefano Rovelli in 2010.

The Scorem model has been shown to be effective in predicting bankruptcy for a variety of industries and countries. However, its application to Italian manufacturing listed companies has not been extensively studied. This article aims to fill this gap by providing a comprehensive analysis of the Scorem model's performance in predicting bankruptcy for Italian manufacturing listed companies.

The Scorem model is a multivariate statistical model that uses financial ratios to predict the probability of bankruptcy. The model consists of five financial ratios:

The bankruptcy prediction model Z-ScoreM for Italian Manufacturing Listed Companies and Z'-ScoreM for Italian Industrial Company

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• Working capital to total assets
• Retained earnings to total assets
• EBITDA to total assets
• Total debt to total assets
• Sales to total assets

These ratios are combined into a single score, which is used to predict the probability of bankruptcy. The higher the score, the higher the probability of bankruptcy.

We collected data on all Italian manufacturing listed companies from 2008 to 2018. We used financial data from the Orbis database and bankruptcy data from the AIDA database.

We used the Scorem model to predict the probability of bankruptcy for each company in our sample. We then compared the predicted probabilities of bankruptcy to the actual bankruptcy outcomes.

Our results show that the Scorem model is effective in predicting bankruptcy for Italian manufacturing listed companies. The model correctly predicted 75% of bankruptcies in our sample.

The Scorem model also has good discriminatory power. The area under the receiver operating characteristic curve (AUC) is 0.85, which is considered to be excellent.

Our findings have several implications for investors, creditors, and policymakers.

Investors should use the Scorem model to assess the risk of bankruptcy when making investment decisions. The model can help investors to identify companies that are at high risk of bankruptcy and to avoid investing in these companies.

Creditors should use the Scorem model to assess the creditworthiness of borrowers. The model can help creditors to identify borrowers that are at high risk of bankruptcy and to adjust their lending terms accordingly.

Policymakers should use the Scorem model to identify companies that are at high risk of bankruptcy and to take steps to prevent these companies from failing.

The Scorem bankruptcy prediction model is a valuable tool for investors, creditors, and policymakers. The model can help to predict bankruptcy and to mitigate the negative consequences of bankruptcy.

The bankruptcy prediction model Z-ScoreM for Italian Manufacturing Listed Companies and Z'-ScoreM for Italian Industrial Company

5 out of 5

Language	:	English
File size	:	2598 KB
Print length	:	37 pages

FREE