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The specifics of predicting the bankruptcy of State-owned organizations as per the Russian laws

Vol. 25, Iss. 6, JUNE 2019

Received: 1 April 2019

Received in revised form: 15 April 2019

Accepted: 30 April 2019

Available online: 28 June 2019

Subject Heading: Financial system

JEL Classification: G33, G38

Pages: 1266–1279

https://doi.org/10.24891/fc.25.6.1266

Fedorova E.A. Financial University under Government of Russian Federation, Moscow, Russian Federation
ecolena@mail.ru

https://orcid.org/0000-0002-3381-6116

Khrustova L.E. Financial University under Government of Russian Federation, Moscow, Russian Federation
khrustoval@yandex.ru

https://orcid.org/0000-0002-0884-2734

Subject The article discusses legislative principles for predicting the bankruptcy of State-owned entities in Russia.
Objectives The study is aimed to refine the methodology that the Russian regulations prescribe to predict the bankruptcy of State-owned entities in line with their specifics. It specifies the applicable financial indicators and economic guidance for their evaluation. As per Hypothesis 1, financial indicators set out in the effective laws are outdated and fail to accommodate the specifics of State-owned corporations. As per Hypothesis 2, although being overlooked in the effective laws, some ratios have the high predicting potential (over 70 percent) and can supplement the methodology.
Methods The study is based on the methods approved by the Federal Agency for State Property Management. Applying the CART technique to financial metrics, we managed to specify their statutory values in line with the specifics of State-owned corporations.
Results Having verified the outcome through a sample of 692 companies, we found an increase in the predictive potential of the above metrics when statutory values change. We proved the high accuracy of some ratios concerning State-owned corporations.
Conclusions and Relevance The findings will help supplement the methodology by the Federal Agency for State Property Management and contribute to the efficiency of bankruptcy forecasts concerning State-owned corporations.

Keywords: bankruptcy, forecast, State-owned organizations, bankruptcy laws, economic guidelines

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