Predicting Private Companies Failure in the Sudan

Abstract

This paper applies failure prediction techniques to a sample of private companies in the Sudan, an African Less Developed Country (LDC). As a first step, the study uses profile analysis and dichotomous classification techniques to test the ability of univariate models in predicting failure in a simple and less complex economic environment. Next, the study replicates Altman Multiple Discriminant Analysis (MDA) to the sample but achieved low failure prediction rates relative to those obtained in the developed and developing economies. The study then re-estimates Altman original model parameters with a significant improvement in failure prediction rates. Finally, using a stepwise MDA methodology, the study develops a three-variable model that improves upon Altman replicated and re-estimated models in classifying companies into failed and nonfailed categories.