Business Crisis and Bankruptcy Prediction Models: The Other Side of Sustainability

Chapter 9 addresses the significant challenge of corporate crises, with a particular focus on SMEs, from both national and international perspectives. It highlights the dynamic nature of corporate crises, which involve a gradual or rapid deterioration in a company’s economic and financial conditions. Without effective recovery interventions, this deterioration can lead to bankruptcy. The chapter emphasizes the need for a dynamic perspective that includes both a current diagnosis of the company’s situation and a forward-looking analysis to predict potential insolvencies. Since the introduction of Altman’s model, there have been notable advancements in the scientific literature, including the development of sophisticated tools like neural networks and artificial intelligence. Despite these advancements, Altman’s model is still favoured for its simplicity and practical application. This approach facilitates the early identification of insolvency risks at both the company and macroeconomic levels, helping banks and policymakers implement effective interventions. The insights gained are crucial for governance, supporting sustainable resource management and preventing systemic crises that could adversely affect the broader economy.