Bootstrap Replacement to Validate the Influence of the Economic Cycle on the Structure and the Accuracy Level of Business Failure Prediction Models

The aim of this study was to answer the question of how the economic cycle affects the stability and efficiency of business failure prediction models, using bootstrap replacement method for validation. We analyse 2228 Spanish small and medium‐sized enterprises for the period 2001–2009, and divide it...

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Bibliographic Details
Published in:Journal of forecasting 2015-07, Vol.34 (4), p.275-289
Main Authors: Manzaneque, Montserrat, GarcíA-Pérez-De-Lema, Domingo, Antón Renart, Marcos
Format: Article
Language:English
Subjects:
Bootstrap finance
Bootstrap mechanism
bootstrap replacement method
Business cycles
Business economics
business failure prediction
Business failures
corporate failure
Economic activity
economic cycle
Economic models
Financial theory
Forecasts
Predictions
Small and medium sized enterprises
Studies
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Summary:The aim of this study was to answer the question of how the economic cycle affects the stability and efficiency of business failure prediction models, using bootstrap replacement method for validation. We analyse 2228 Spanish small and medium‐sized enterprises for the period 2001–2009, and divide it into three different phases of the economic cycle (growth, crisis, recession). We find that the structure and the ability of business failure prediction models are different according to the economic cycle. These findings are relevant for the debate on the most suitable financial ratios when developing business failure prediction models and to pose their accuracy level in these prediction models. Copyright © 2015 John Wiley & Sons, Ltd.
ISSN:0277-6693
1099-131X
DOI:10.1002/for.2327