Effective Decision and Bankruptcy Prediction Risk
Simultaneous with extensive environmental changes and the rapid development of technology which has
increasingly accelerated economy , competitiveness economical enterprises have restricted earning profit and make probable
closing of bankrupt firms.Thus it seems necessary to find a model that can predict financial crisis and bankruptcy of
companies.Now a days occurrence of significant progress in other sciences, such as computer and math attract the attention of
the financial scholars toward designing and using more exact patterns like Data Envelopment Analysis (DEA).
For this purpose, this study uses DEA technique to predict the bankruptcy risk likelihood of manufacturing firms and also
compare its predictability with 2 methods: Probit, and Multiple-discriminant analysis. Study sample includes all
manufacturing firms listed in Stock Exchange of Tehran from 2004-2014. The results showed that the accuracy of the designed
model under DEA technique is %72 and the predictability of Probit and Multiple-discriminant models has been 80, and %70
respectively. The results also showed the weak performance of DEA and Multiple-discriminant analysis compared to the
probit model and Multiple discriminant analysis which has a better performance in identify bankruptcy risk .
Index Terms— Bankruptcy Risk, Data Envelopment Analysis, Multiple Discriminant Analysis Model , Probit models.