Bankruptcy Prediction in the High-Tech Industry

Abstract

This study examines the accuracy financial ratios predict bankruptcy in the high-tech industry. The prediction model is based on a sample of 120 companies (60 bankrupt and 60 matching non-bankrupt companies) during the period 2000-2002 for which six financial ratios were employed. The ratios were calculated from financial statements one and two years prior to bankruptcy. Similar studies were conducted by other authors in different industries such as retailing and manufacturing. However, no study has been found in the high-tech industry. The model's predictability is tested by using 20 bankrupt and 20 matching non-bankrupt firms after 2002, and was found to accurately predict 85 percent of the bankruptcy and non-bankruptcy cases.