engleski

Micro and macroeconomic variables in predicting financial distress of companies

Although the company is not in itself an isolated economic unit and the circumstances in the macroeconomic environment inevitably affect its financial condition, most of the developed models used to predict business failures are based solely on the financial performance of companies. Such models represent a microeconomic approach to predicting company’s financial distress. In recent years there has been a growing interest in exploring the predictive power of macroeconomic variables. Developing models based on both micro and macroeconomic aspects of a company and its environment is a logical future step in predicting financial distress. This paper provides an overview of the main theories and literature review that deal with bankruptcy and explore the basic characteristics of associated predictive models. Authors suggest that the future work should be done in performing research in Croatia and transitional countries using macroeconomic aspect in prediction of company’s failure.

financial distress; financial ratios; macroeconomic variables

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