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Does the bankrupt cheat? Impact of accounting manipulations on the effectiveness of a bankruptcy prediction

The aim of this article is to answer the question whether the unreliability of the Altman bankruptcy prediction model may be caused by manipulations in financial statements. Our study was carried out on a group of 369 bankrupt Polish companies, with the research period covering the years 2011–2020....

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Detalles Bibliográficos
Autores principales: Mućko, Przemysław, Adamczyk, Adam
Formato: Online Artículo Texto
Lenguaje:English
Publicado: Public Library of Science 2023
Materias:
Acceso en línea:https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9844914/
https://www.ncbi.nlm.nih.gov/pubmed/36649299
http://dx.doi.org/10.1371/journal.pone.0280384
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author Mućko, Przemysław
Adamczyk, Adam
author_facet Mućko, Przemysław
Adamczyk, Adam
author_sort Mućko, Przemysław
collection PubMed
description The aim of this article is to answer the question whether the unreliability of the Altman bankruptcy prediction model may be caused by manipulations in financial statements. Our study was carried out on a group of 369 bankrupt Polish companies, with the research period covering the years 2011–2020. In the study, we divided the companies into two groups: those correctly classified by Altman’s model as at risk of bankruptcy, and companies for which the model did not indicate a significant bankruptcy risk. Using a logit model, we tested whether the probability of companies being correctly classified as failed depends on the risk of a manipulation of financial statements. We use Benford’s law to measure the risk of a manipulation of financial statements. We also repeated our study using panel data models. Our analyses show that the manipulation of financial statements is not the cause of the inaccurate predictions of the Altman model. On the contrary, the results of the analyses indicate that manipulations occurs for companies with a lower Z-score and therefore a worse financial situation. This means that a deterioration in the quality of financial statements can be a signal of an increasing probability of bankruptcy.
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spelling pubmed-98449142023-01-18 Does the bankrupt cheat? Impact of accounting manipulations on the effectiveness of a bankruptcy prediction Mućko, Przemysław Adamczyk, Adam PLoS One Research Article The aim of this article is to answer the question whether the unreliability of the Altman bankruptcy prediction model may be caused by manipulations in financial statements. Our study was carried out on a group of 369 bankrupt Polish companies, with the research period covering the years 2011–2020. In the study, we divided the companies into two groups: those correctly classified by Altman’s model as at risk of bankruptcy, and companies for which the model did not indicate a significant bankruptcy risk. Using a logit model, we tested whether the probability of companies being correctly classified as failed depends on the risk of a manipulation of financial statements. We use Benford’s law to measure the risk of a manipulation of financial statements. We also repeated our study using panel data models. Our analyses show that the manipulation of financial statements is not the cause of the inaccurate predictions of the Altman model. On the contrary, the results of the analyses indicate that manipulations occurs for companies with a lower Z-score and therefore a worse financial situation. This means that a deterioration in the quality of financial statements can be a signal of an increasing probability of bankruptcy. Public Library of Science 2023-01-17 /pmc/articles/PMC9844914/ /pubmed/36649299 http://dx.doi.org/10.1371/journal.pone.0280384 Text en © 2023 Mućko, Adamczyk https://creativecommons.org/licenses/by/4.0/This is an open access article distributed under the terms of the Creative Commons Attribution License (https://creativecommons.org/licenses/by/4.0/) , which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.
spellingShingle Research Article
Mućko, Przemysław
Adamczyk, Adam
Does the bankrupt cheat? Impact of accounting manipulations on the effectiveness of a bankruptcy prediction
title Does the bankrupt cheat? Impact of accounting manipulations on the effectiveness of a bankruptcy prediction
title_full Does the bankrupt cheat? Impact of accounting manipulations on the effectiveness of a bankruptcy prediction
title_fullStr Does the bankrupt cheat? Impact of accounting manipulations on the effectiveness of a bankruptcy prediction
title_full_unstemmed Does the bankrupt cheat? Impact of accounting manipulations on the effectiveness of a bankruptcy prediction
title_short Does the bankrupt cheat? Impact of accounting manipulations on the effectiveness of a bankruptcy prediction
title_sort does the bankrupt cheat? impact of accounting manipulations on the effectiveness of a bankruptcy prediction
topic Research Article
url https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9844914/
https://www.ncbi.nlm.nih.gov/pubmed/36649299
http://dx.doi.org/10.1371/journal.pone.0280384
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