A new proposal to predict corporate bankruptcy in Italy during the 2008 economic crisis

Abstract

Timely Corporate failure prediction is a major issue in today’s economy especially considering the financial crisis that has affected the World Economy in the last decade. Any prediction technique must be reliable (good recognition rate, sensitivity and specificity), robust and able to give predictions with a sufficient time lag to allow for corrective actions. In this paper we have considered the case of Small-Medium Enterprises (SMEs) in Italy during the 2008 crisis, introducing a non-parametric classification algorithm to predict corporate failure based on financial indicators up to 8 years in advance.