Prediction of Firms Financial Distress: The case of the Greek Fish-Farming Industry

Abstract

The economic crisis in recent years has brought significant challenges in almost all business and shown that exogenous factors act as catalysts in markets. As a consequence of such a result, there is a need to highlight the importance of creating predictability models for analysing potential future behaviour, namely creating models for assessing potential economic impact that contribute a lot in avoiding firms financial default. Our study is focused in describing previous models for predicting firms bankruptcy. We use factors such as profitability, activity, liquidity, age, size, growth rate and capital structure, as the most significant ratios affecting the distress event in the Greek fish-farming industry and the impact of each ratio in prediction models. We propose a model in which indicators used are critical for firms financial viability. The aim of this study is to find signals of firms financial distress activity as well as actions need to be taken to avoid it, in order to provide the management with certain strategic movements to carry out to avoid potential failure.

Keywords: Greek fish-farming industry, financial ratios, profitability, activity, liquidity, financial distress.