Predicting the future of the corporate market: a proposed dual fraud-bankruptcy score based on evidence from Romanian companies

Abstract

Our study aims to assess its predictive accuracy in relation to bankruptcy risk models and propose a new composite dual model that addresses both fraud and bankruptcy risks. This new proposed dual fraud-bankruptcy score incorporates literature-based indicators and is tested on Romanian entities to fit the local context. Our study analyzes the combined effects of models for detecting fraud and bankruptcy on financial indicators, unlike previous research that examined these models separately. This proposed model aims to differentiate between manipulative and non-manipulative companies while assessing bankruptcy risks. By combining the Beneish score with traditional bankruptcy models, we develop a comprehensive framework for assessing financial anomalies and enhancing the understanding of the relationship between fraud and bankruptcy risks, focusing on the Romanian listed companies.

Keywords

• Bankruptcy
• earnings manipulation
• Beneish
• new composite model