New approaches for the financial distress classification in agribusiness

Abstract

After the recent financial crisis the need for unchallenged tools evaluating the financial health of enterprises has even arisen. Apart from well-known techniques such as Z-score and logit models, a new approaches were suggested, namely the data envelopment analysis (DEA) reformulation for bankruptcy prediction and production function-based economic performance evaluation (PFEP). Being recently suggested, these techniques have not yet been validated for common use in financial sector, although as for DEA approach some introductory studies are available for manufacturing and IT industry. In this contribution we focus on the thorough validation calculations that evaluate these techniques for the specific agribusiness industry. To keep the data as homogeneous as possible we limit the choice of agribusiness companies onto the area of the countries of Visegrad Group. The extensive data set covering several hundreds of enterprises were collected employing the database Amadeus of Bureau van Dijk. We present the validation results for each of the four mentioned methods, outline the strengths and weaknesses of each approach and discuss the valid suggestions for the effective detection of financial problems in the specific branch of agribusiness.

Keywords

• agribusiness
• DEA
• financial distress
• logistic regression
• production functions
• Z-score