Methodological peculiarities of probability estimation of bankruptcy of agrarian enterprises in Ukraine
Purpose. The purpose of the study is to develop the concept of complex estimation of bankruptcy probability of agrarian enterprises in Ukraine, taking into account the specifics of agricultural activities.
Methodology / approach. To achieve the purpose, the following research methods were used: abstract-logical (at disclosing the essence of the concept of “bankruptcy”); dialectical (for theoretical generalizations on determining the problems and ways to overcome them, drawing conclusions); expert estimations, comparative analysis, analysis and synthesis (at developing the concept of estimating the probability of bankruptcy); relative indicators-coefficients (at studying models for estimating the probability of bankruptcy occurrence); monographic (for in-depth study of separate types of factors affecting the probability of bankruptcy); graphical and tabular (at presenting the research results).
Results. It has been proven that the discriminant analysis for estimating the probability of bankruptcy (the construction of multifactor models that summarize the most important financial indicators in the integrated index) does not take into account the industry characteristics of agrarian enterprises. The concept of bankruptcy diagnostics is proposed, which combines discriminant analysis and expert estimation of qualitative signs of a possible crisis of an agrarian enterprise. The indicators selected for expert examination cover non-financial factors – the risks and threats to agricultural production in Ukraine, and their generalization may specify the risk of bankruptcy occurrence. The scoring model has been derived by the method of expert estimations, the scale has been developed, which is combined with the discriminant one that will enable to bring the results of the research into the interval of the indicator for estimating the occurrence of bankruptcy.
Originality / scientific novelty. The definition of the term “bankruptcy” has been improved: the author’s definition combines the economic and legal approaches to it. The main risks of agricultural activities in Ukraine have been specified and their impact on the probability of bankruptcy of agrarian enterprises has been outlined. It has been developed the methodological concept for estimating the probability of bankruptcy of agrarian enterprises, which takes into account informal factors. For the first time, in order to predict the bankruptcy of agrarian enterprises, it has been proposed to combine discriminant analysis and expert estimation of qualitative indicators that increase its risk in agriculture.
Practical value / implications. The application of the developed methodology provides an opportunity for the agrarian enterprise of timely responding to the threats of financial crisis and bankruptcy in order to prevent them. The proposed approach can be used as an element of estimating the insurance risk or investment attractiveness of agricultural enterprises. In case of its adaptation, the methodology can be used in foreign practice.
2. Altman, E. I. (1984), A further empirical investigation of the bankruptcy cost question. Journal of Finance, vol. 39, no. 4, pр. 1067–1089. https://doi.org/10.2307/2327613.
3. Argenti, J. (1976), Corporate collapse: the causes and symptoms. Holsted Press, McGraw-Hill, London.
4. Beaver, W. (1966), Financial ratios as predictors of failure. Journal of Accounting Research, vol. 4, pp. 71–111. https://doi.org/10.2307/2490171.
5. Knight, F. H. (1921), Risk, uncertainty, and profit. Hart, Schaffner, and Marx Prize Essays, no. 31. Houghton Mifflin, Boston and New York, USA.
6. Skoun, T. (1997), Upravlencheskiy uchet [Managerial Accounting], Audit; YuNITI, Moscow, Russia.
7. Springate, G. L. V. (1978), Predicting the possibility of failure in a Canadian firm. Unpublished M.B.A. Research Project, Simon Fraser University, Canada.
8. Tetens, J. N. (1786), Einleitung zur Berechnung der Leibrenten und Anwartschaften, Leipzig, Germany.
9. Alaminos, D., del Castillo, A., and Fernández, M. Á. (2018), Correction: A Global Model for Bankruptcy Prediction. PLoS ONE, vol. 13(11), e0208476. https://doi.org/10.1371/journal.pone.0208476.
10. Jaki, A. and ́Cwiek, W. (2021), Bankruptcy prediction models based on value measures. Journal of Risk and Financial Management, vol. 14(1), 6. https://doi.org/10.3390/jrfm14010006.
11. Horváthová, J. and Mokrišová, M. (2018), Risk of bankruptcy, its determinants and models. Risks, vol. 6(4), 117. https://doi.org/10.3390/risks6040117.
12. Prusak, B. (2018), Review of research into enterprise bankruptcy prediction in selected central and eastern European countries. International Journal of Financial Studies, vol. 6(3), 60. https://doi.org/10.3390/ijfs6030060.
13. Shumway, T. (2001), Forecasting bankruptcy more accurately: a simple hazard model. The Journal of Business, vol. 74, no. 1, pp. 101–124. https://doi.org/10.1086/209665.
14. Bărbuță-Mișu, N. and Madaleno, M. (2020), Assessment of bankruptcy risk of large companies: European countries evolution analysis. Journal of Risk and Financial Management, vol. 13(3), 58. https://doi.org/10.3390/jrfm13030058.
15. Hosaka, T. (2019), Bankruptcy prediction using imaged financial ratios and convolutional neural networks. Expert systems with applications, vol. 117, pр. 287–299. https://doi.org/10.1016/j.eswa.2018.09.039.
16. Papana, A. and Spyridou, A. (2020), Bankruptcy prediction: the case of the greek market. Forecasting, vol. 2(4), рр. 505–525. https://doi.org/10.3390/forecast2040027.
17. Heaton, J. B. (2020), The Altman Z score does not predict bankruptcy. AIRA Journal, vol. 33(3), pp. 33–34. https://doi.org/10.2139/ssrn.3570149.
18. Lukason, O. and Andresson, A. (2019), Tax arrears versus financial ratios in bankruptcy prediction. Journal of Risk and Financial Management, vol. 12(4),187. https://doi.org/10.3390/jrfm12040187.
19. Aleksanyan, L. and Huiban, J.-P. (2016), Economic and financial determinants of firm bankruptcy: evidence from the French food industry. Review of Agricultural, Food and Environmental Studies, vol. 97, pp. 89–108. https://doi.org/10.1007/s41130-016-0020-7.
20. Dinterman, R., Katchova, A. L. and Harris, M. J. (2018), Financial stress ad farm bankruptcies in U.S. agriculture. Agricultural Finance Review, vol. 78, no. 4, рр. 441–456. https://doi.org/10.1108/AFR-05-2017-0030.
21. Valaskova, K., Durana, P., Adamko, P. and Jaros, J. (2020), Financial compass for Slovak enterprises: modeling economic stability of agricultural entities. Journal of Risk and Financial Management, vol. 13(5), 92. https://doi.org/10.3390/jrfm13050092.
22. Savickaja, G. V. (2017), Jekonomicheskij analiz [Economic analysis], 14nd ed, Infra-M, Moskva, Russia.
23. Tereshchenko, O. O. (2004), Antikrizove fіnansove upravlіnnya na pіdpriemstvі [Crisis financial management at the enterprise], KNEU, Kyiv, Ukraine.
24. Melikhova, T. (2019), Bankruptcy probability estimation to improve the financial condition of the enterprise. Ahrosvit, vol. 10, pp. 11–18.
25. Rudyka, V. I., Velykyi, Yu. М. and Zema, O. D. (2018), The economic essence of the concept of «bankruptcy», causes, and consequences for the enterprise. Infrastruktura rynku, vol. 18, pp. 127–132.
26. Chupis, A. V.ed. (1999), Fynansovoe polozhenye predpryyatyya: otsenka, analyz, planyrovanye [The financial position of the enterprise: evaluation, analysis, planning], Unyversytetskaya knyha, Sumy, Ukraine.
27. Tranchenko, A. M. (2013), Bankruptcy prediction in the context of the competitiveness of agriculture. Ekonomika ta derzhava, vol. 12, pр. 44–46.
28. Yehorova, O., Dоrоhan-Рysarenkо, L., Chip, L. and Tyutyunnik, M. (2019), Assessment of entrepreneurial risks in agriculture. Technology audit and production reserves, vol.1/4(45), pp. 4–10. https://doi.org/10.15587/2312-8372.2018.146943.
29. Vishnevskaya, О. O. and Voytseshina, N. I. (2017), The causes and features of management of business risk in agribusiness. Visnyk Khersonskoho derzhavnoho universytetu. Ser.: Ekonomichni nauky, vol. 23(I), pp. 142–145.
30. Zhmurko, I. (2017), Risks in agricultural sector and the need of their insurance. Economic discourse, vol. 1, pp. 42–49.
31. Zakharchenko, O. (2016), Risk management at enterprises of livestock. Formuvannia rynkovykh vidnosyn v Ukraini, vol. 3, pp. 61–66.