Financial performance in manufacturing firms: a comparison between parametric and non parametric approaches

This paper provides a methodological analysis of credit risk in manufacturing firms by using two different credit scoring approaches. The first is the traditional discriminant approach (DA) for bankruptcy prediction based on a logistic regression model, whereas the second, Data Envelopment Analysis (DEA), is a non-parametric approach for measuring firms’ efficiency which do es not require ex-ante information on bankrupted firms. By using a manufacturing sample of both healthy and bankrupted firms during the period 2003-2009 we provide an in-depth comparison of DA and DEA and conclude that a correct evaluation of firms’ credit worthiness is the result of successive fine tuning procedures requiring the use of multiple methodological tools.