Dynamic aspects of bankruptcy prediction logit model for manufacturing firms in Poland

Abstract

Many types of bankruptcy prediction models have been formulated by business theory and practice. Among them, a wide group is composed of classification models, which can divide firms’ population into two groups: bankrupts and non-bankrupts. The current bankruptcy prediction models for firms in Poland are usually based on the company’s internal financial factors which mainly have a static character. The aim of the paper is to present the possibility of introducing into the bankruptcy prediction logit model a time factor which represents dynamic changes in external economic environment. The proposal of time factor inclusion in this type of model was tested on data concerning manufacturing companies in Poland from 2005 to 2008.