A Multivariate Model for Predicting Business Failures of Hospitality Firms

Abstract

This study estimated a multivariate discriminant model for predicting hospitality firm bankruptcy. The model has a 93 per cent accuracy in classifying the in-sample firms into bankrupt and non-bankrupt firms. The model suggests that unprofitable firms burdened with debts, short-term debts in particular, are more likely to be candidates for bankruptcy. Fast expansion and sales growth of those firms may increase their bankruptcy likelihood.