A comparison of the discrimination of business failure prediction models

In this paper, we compare the business failure prediction accuracy among Linear Programming Discriminant Analysis (LPDA) model, Multivariate Discriminant Analysis (MDA) model and logit analysis model. The data for 417 companies analyzed were gathered from KIS-FAS published by Korea Information Service in 1999. The result of comparison for four time horizons shows that LPDA is advantageous in prediction accuracy over the other two models when overall hit ratio and business failure accuracy are considered simultaneously.