A Study On The Korean Constructor’s Bankruptcy Forecasting

In Korean economy, the importance of constructor is much more than what the relevant statistics shows. However, most of the preceding analyses have been done about manufacturing company, not constructor, and mostly deal with data that are before2008year when financial crisis happened. In addition, although some of paper deal with forecasting model regarding constructor, they don’t use financial indices that can reflect the reality of constructor. Therefore, different from the preceding analyses, this paper uses the construction companies’ financial indices, which went bankrupt between2008year and2013year, trying to achieve objective and practical early warning model which can reflect constructor’s financial attribute. For instance, considering the fact that Korean construction company supplies lots of credit security for developers, this paper at first time uses credit security ratio from financial statement notes in establishing forecasting model. Also, this paper’s model covers construction company’s all kinds of receibables and payables, the amount of which are very high in Korean construction company.With respect to analysis samples, this paper selects30construction companies which went bankrupt because of2008financial crisis and30construction companies which have strong competitiveness in construction sector. Through SPSS statistic software program, this study chooses12financial indices by using’Independent Samples T-test’with32influencing financial indices which are proved validity by preceding research, and establishes four forecasting models by ’Logistic regression’and’Discriminant analysis’with the12indices, finally carring out a comparative study of the predicting abilities and exactness of the four models.Based on the above study, this paper draws the following conclusions;(1) Among12indices which are chosen by’Independent Samples T-test’and’Correlation Anaysis’,5indices are stability ratios(Equity ratio, Current ratio, Credit security ration, Short term loan ratio, Short term liability ratio), showing similar results with preceding researches relevant to predicting constructor’s bankruptcy. Through this result we can assure that controlling liability is one of the most important factor in managing construction company.(2) This paper suggests two’Logistic regression’models. The first logistic model chooses four indices(Credit security ratio, Short term liability ratio, Total asset turnover ratio and Selling, general and administration expense ratio).The second logistic model also selects four indices among which first3indices are same with the first model and Account-receivables turnover ratio is chosen. These two models’predicting exactness shows respectively85.42%and83.33%.(3) And this paper shows two’Discriminant analysis’models. Other expenses ratio and Interest earned ratio are selected by the first model. On the oter hands, the second model chooses Short term liability ratio and Total asset turnover ratio. This result shows that Short term liability ratio and Total asset turnover ratio are chosen by both of Logistic model and Discriminant analysis model, we can assure it is very important to control liability and maintain substantial sales in managing construction company. These two models’predicting exactness indicates respectively79.17%and64.58%. Logistic model shows more superiority over Discrimiant analysis model in forecasting constructor’s bankruptcy.