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Financial fragility of companies - Estimation of a probabilistic model LOGIT and PROBIT: Ecuadorian case

Abstract:

This research work is aimed at the estimated two regression models, with which it is intended to measure the fragility of Ecuadorian companies. Development and scope of the proposed objective, the information in the financial statements of 34.575 both large companies are used, medium, small and micro enterprises that are controlled and monitored by the Superintendency of Companies in 2013, plus a selection of be held companies for the development of this work because the account information is limited for some companies in the total sample used in this study is of 22,854 companies. The methodology used in this work is to estimate two models of discrete selection: Logit and Probit. With the information available balance sheet financial indicators were useful as explanatory variables in the models posed regression, from which relevant financial ratios such as ROA, ROE and liquidity are identified were built, use is also made of financial gaps of patrimonio-debt and cash for measuring the fragility of companies. The results show a negative influence Slacks used, as in this case increase the fragility of Ecuadorian companies into bankruptcy, a positive value of ROA equally evidence the probability of default on payment obligations as they thus it reduces profitability increases the fragility of a company into bankruptcy, while a positive value of ROE reduces the brittleness of the company.