Galya Taseva
Bankruptcy Risk in Small and Medium-Sized Enterprises in Bulgaria
Summary:
The bankruptcy risk study for SMEs in Bulgaria is based on data from the financial statements of 100 non-financial firms with different main activities for the period 2014 - 2016, provided by the National Statistical Institute. The results of the study show that the implementation of well-established models of bankruptcy prediction, such as those of Altman, Springate, Taffler and Biever, may serve as an indicator for financial distress, but it is not sufficient to assess the risk of bankruptcy in Bulgarian economic conditions.
The survey results suggest that the coefficient Cash flow from operating activities / Current Liabilities has the potential to serve as an indicator of the differentiation of companies that are threatened with bankruptcy in the short term and even has some advantages over the models of Altman, Springate, Taffler and Biever in Bulgarian economic conditions. Given the high levels of the gray economy in the country and the widespread practice of manipulating the financial statements, it is reasonable in the analysis of bankruptcy risk to use in addition to the balance sheet and income statement indicators and such indicators incorporating information on the cash flow from operating activities of SMEs that is more difficult to manipulate. The large share of overdue and uncollectible receivables from clients in the country also presupposes using cash flow information to analyze bankruptcy risk. The Altman, Springate, Taffler and Biever models contain only in-company balance sheet and corporate income statement information and are not tailored to capture the systemic risk that creates high inter-firms indebtedness in the country, and in particular the high proportion of overdue trade receivables.
