Analysis of the factors affecting the financial failure and bankruptcy by the generalized ordered logit model

In this thesis, Altman-Z score method was applied to 139 industrial companies listed in BIST in 2017 and analyzed with generalized ordered logit model in order to find the factors determining the financial failure and bankruptcy of companies. In this study, financial statements of companies and data obtained from annual reports are used. These data were obtained from the web pages of companies, KAP (https://www.kap.org.tr/tr), and the website of the BIST (Stock Exchange Istanbul,https://www.borsaistanbul.com/). Altman-Z score and companies' bankruptcy risks are classified as "distress-gray-safe" zones and are used as dependent variables in the model. The independent variables are obtained from the financial ratios obtained from the financial statements of the companies. The ordered logit model was estimated, and it was found that the predicted model violated the assumption of parallel slopes. Considering the ordered structure of the dependent variable, the generalized ordered logit model, that relaxed the assumption of parallel slopes, was analyzed and interpretations were made according to the marginal effects of the model. As a result, an increase in operating profit margin, asset turnover rate, net profit margin and acid-test ratio increases the likelihood of the company being in the safe zone.At the same time, an increase in the financial leverage ratio reduces the likelihood of the company being in a safe zone.