Bankruptcy Prediction: Application of Logit Analysis in Export Credit Risks

Abstract

To date, relatively little empirical research has been conducted on the efficacy of the trade credit risk prediction model in the context of international trade applications. Using a sample of listed firms in seven Asia-Pacific capital markets (Hong Kong Japan, Korea, Malaysia Singapore, Thailand, and the Philippines) from 2001 to 2003 with available data, we have made a preliminary attempt at empirically studying a predictive export credit risk model based on financial ratios, firm-specific characteristics (size, maturity, R&D expenses, and depreciation expenses), and country risk measures. The results show that our Logit models demonstrate decent classification accuracy and robustness. Specifically, the prediction ability is approximately equal to classification ability when the model is applied to a testing sample. Furthermore, the results indicate that the closer the analysis is to the credit crisis occurrence, the more improved the classification accuracy and prediction accuracy are.