Predicting Financial Failure: Some Evidence from New Brunswick Agricultural Co-Ops

Abstract

Given the essential role co-ops play in the Canadian economy, the primary purpose of this paper is to develop methods to forecast their likelihood of insolvency. However, investor-owner firms form the basic unit of analysis of most popular bankruptcy predictors used in Canada. The question is whether the key underlying elements that differentiates the latter from co-ops justifies deriving specific bankruptcy prediction formulas exclusively for each type of business organization. To that effect, this research evaluates the efficacy of these current predictors and suggests an improved predictor for agricultural co-operatives.