The Correlation Study between Accounting Information and Bankruptcy of Domestic Manufacturing Industry

Abstract

Predicting the possibility on corporate bankruptcy of the domestic manufacturing industry is expected to increase the efficiency of corporate support policy in macro perspective. Altman's discrimination model and Olson's logit model are representative research models developed via preceding research. First, the study extracted financial statements and other accounting information from listed manufacturers on KOSDAQ from 2014 to 2018(5 years) to analyze factors on accounting information highly correlated with firm value. Second, the 30 out of 525 corporation under the same period, it failed to recover, the others(495) were analyzed through logit model to verify the correlation between accounting information and bankruptcy-forecasting. In the factor analysis, accounting information which well reflects firm value, total assets, sales, net profit, equity etc., were shown to be highly correlated. Verifying these factors via logistic regression, it is confirmed that the net loss had occurred since three years before bankruptcy and that a year before the bankruptcy, equity capital had been eroded due to the net loss. This is a result supporting the preceding study that shows firm value is highly correlated with accounting information in financial statements. The logit analysis of this study shows that the key factors in corporate bankruptcy are the net loss and equity capital erosion. This result is expected to help manufacturing companies grow and develop when it is applied to the policy to raise corporate competitiveness.