Integrating cognitive mapping and MCDA for bankruptcy prediction in small- and medium-sized enterprises

The 2008 global financial crisis and its aftermath have shown the ability to predict bankruptcy to be a vital management skill and that the methodologies used for that purpose should be as close to reality as possible. This study aims to develop a multiple criteria system to predict bankruptcy in sm...

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Bibliographic Details
Published in:The Journal of the Operational Research Society 2017-09, Vol.68 (9), p.985-997
Main Authors: Oliveira, Manuel D. N. T., Ferreira, Fernando A. F., Pérez-Bustamante Ilander, Guillermo O., Jalali, Marjan S.
Format: Article
Language:English
Subjects:
Bankruptcy
bankruptcy prediction
Business and Management
cognitive mapping
Cognitive models
Information management
Management
Mapping
MCDA
Multiple criterion
Neural networks
Operations Research/Decision Theory
Small & medium sized enterprises-SME
SMEs
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Summary:The 2008 global financial crisis and its aftermath have shown the ability to predict bankruptcy to be a vital management skill and that the methodologies used for that purpose should be as close to reality as possible. This study aims to develop a multiple criteria system to predict bankruptcy in small- and medium-sized enterprises (SMEs). It combines cognitive mapping with the measuring attractiveness by a categorical based evaluation technique (MACBETH), resulting in a more complete and transparent process for evaluating SMEs and their risk of bankruptcy. What differentiates this framework is the fact that it is based on information obtained directly from managers and bank analysts who deal with this type of adversity on a daily basis. The results highlight the importance of financial and strategic aspects, among others, and demonstrate how cognitive mapping can improve the understanding of the decision situation at hand, while MACBETH facilitates the calculation of trade-offs among evaluation criteria.
ISSN:0160-5682
1476-9360
DOI:10.1057/s41274-016-0166-3