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Cite as
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Vollständiger Titel
FINANCIAL REPORTING
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Verlag
FrancoAngeli
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ISSN
2036-671X (Gedruckte Zeitschrift)
2036-6779 (Online-Zeitschrift)
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Nummer der Ausgabe
2
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Andere Beschreibung der Ausgabe
2
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Erscheinungsdatum der Ausgabe
2024
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Vollständiger Titel
Early Warning Systems for financial crises prediction in private companies: Evidence from the Italian context
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Von (Autor)
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Erste Seite
133
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Letzte Seite
161
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Sprache des Textes
Englisch
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Erscheinungsdatum
2024/12
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Copyright
2024 FrancoAngeli srl
Abstract/Hauptbeschreibung
Purpose: This study compares models for predicting business financial crises, fo-cusing on which are most effective. In light of the new European Directive on business failure, it highlights a trade-off between predictive accuracy and timeli-ness in static models and offers an alternative approach. Design/methodology/approach: This study examines the Italian early warning system (EWS), testing static alert indicators' predictive ability on a large sample of private companies. It then proposes a dynamic version of the EWS. Findings: The results show a trade-off between predictive ability and timeliness for static models. In contrast, a dynamic system is more accurate in predicting cri-sis events, allowing managers to take corrective actions. Originality: The results highlight the limitations of static prediction models and emphasize the potential of a simple dynamic model that is specifically designed for small- and medium-sized entities (SMEs). Practical implications: This study proposes a dynamic model tailored for SMEs, which are particularly vulnerable to financial crises. This insight can help managers and policymakers balance accurate predictions with timely interventions, especial-ly in European countries implementing crisis prediction models.
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