Predicting corporate failure: a systematic literature review of methodological issues

Purpose – This paper aims to review the existing literature systematically so as to contribute towards a better understanding of methodological problems of the classical statistical techniques, artificially intelligent expert systems and theoretical approaches to solve the corporate failure syndrome. Design/methodology/approach – This paper presented a systematic review of 83 articles reporting 137 prediction failure models published within 1966-2012 in scholarly reviewed journals in four main disciplines, namely, accounting, finance, banking and economics. The authors performed the systematic literature review with five main sources, namely, Science Direct, Google Scholar, Wiley Interscience, Metalib, Web of Science and Business Source Complete of the Social Sciences. The review modified the approaches used by Aziz and Dar (2006), Ravi and Ravi (2007) and Balcaen and Ooghe (2006). Findings – The results indicate significant body of prior literature on prediction of corporate failure, but a theoretically sound, highly accurate, simple and widely used corporate failure prediction model for stakeholders has yet to be developed. Originality/value – This paper contributes towards a systematic understanding of the methodological problems associated with the statistical, artificially intelligent expert systems and theoretical approaches to solve the corporate failure prediction problems faced by firms in 11 countries.