A MODEL TO ASSESS THE RISK OF BANKRUPTCY FOR AGRICULTURAL FIRMS IN KRASNOYARSK REGION

Abstract

In this paper we report on the algorithm of development of a bankruptcy risk assessment model to be applied to agricultural firms of Krasnoyarsk region, which involves factorial and discriminant analysis of relevant data.

Full Text

The global financial crisis and as a consequence the instability in financial markets have caused a drastic increase in the number of firms going out of business on the background of the overall economic downturn. In this context, an early recognition of pending problems is important for ensuring continuity of one’s business. In connection to this there is a necessity to work out an effective model to assess the risk of bankruptcy, which would allow to predict potential distress situations in Russian companies. The purpose of the present work is to construct such a model of bankruptcy risk assessment for agricultural firms of Krasnoyarsk region. The structure of the model consists of a number of consecutive steps: Step 1. To select a set of significant financial ratios for further analysis, to define classes of financial condition, put together linguistic characteristics. Step 2. To reduce the dimensionality of the selected set of factors by applying the method of principal component analysis and to construct factors hierarchy.