Financial Distress and Bankruptcy Prediction in Conditions of Slovak Republic

. Research background: Prediction of bankruptcy has an important place in financial analysis of an organization in the globalized economy. Ever since the first publication of a paper on bankruptcy prediction in 1932, the field of bankruptcy prediction was attracting researchers and scholars internationally. Over the years, there have been a great many models conceived in many different countries, such as Altman's Z score or Ohlson's model for use for managers and investors to assess the financial position of a company. Globalization in last few decades has made it even more important for all stakeholders involved to know the financial shape of the company and predict the possibility of bankruptcy. Purpose of the article: We aim in this article to examine the financial distress and bankruptcy prediction models used or developed for Slovakia to provide an overview of possibilities adjusted to specific conditions of the Slovak Republic in context of globalization. We will also look at the possibility of use of these prediction models for assessing financial status of non-profit organizations in the Slovak Republic. Methods: We will use analysis and synthesis of current research and theoretical background to compare existing models and their use. Findings & Value added: We hope to contribute with this paper to the theoretical knowledge in this field by summarizing and comparing existing models used.


Introduction
Prediction of bankruptcy has an important place in financial analysis of an organization. Ever since the first publication of a paper on bankruptcy prediction in 1932, the field of bankruptcy prediction was attracting researchers and scholars around the world. Over the years, there have been a great many models conceived in many different countries, such as Altman's Z score or Ohlson's model. The main aim of their scientific work was primarily to create models that would be able to predict with a sufficient degree of probability the future development of the company in advance. [1] Globalization in last few decades has made it even more important for all stakeholders involved to know the financial shape of the company and predict the possibility of bankruptcy. The market economy is a dynamic space designated by the emergence but also the extinction of many business entities. The financial problems of one business entity may adversely affect business entities that work closely with it. [2] Many studies were also dedicated to the verification of such models. Some of the research brings up the limitations that these models have. Among them are the usefulness of their use for predicting bankruptcy in different industries and countries.
Every prediction model is constructed on data from a specific country or group of countries, no matter what method is used. Some of the models are even based on industry specific data. This data is based on specific conditions in the country, its economic development, history of its capital markets. Therefore, their applicability to different countries might be limited and country or industry specific models should be used with caution. Models developed in the specific economic sector highly outperform the prediction ability of other models either developed in the same country or abroad. [3] In case of Slovakia, some of foreign models are not usable due to the state of Slovak capital market. Kliestik et al. [4] identified that different countries prefer different financial rations in developing models of prediction of financial distress with differences arising as a consequence of common changing political, market and economic conditions. Kral et al. [5] also assessed the use of financial ratios.
Slovak Republic lacks general prediction models that are accepted. [6] However, as we will see in the later part of the article, it is a subject of current research among academics in Slovakia.
We aim in this article to present and examine the financial distress and bankruptcy prediction models used or developed for Slovakia.

Methodology
We aim in this article to examine the financial distress and bankruptcy prediction models used or developed for Slovakia to provide an overview of possibilities adjusted to specific conditions of the Slovak Republic in context of globalization. We will also look at the possibility of use of these prediction models for assessing financial status of non-profit organizations in the Slovak Republic. To achieve that aim, we looked through the scientific databases such as Web of Science and Google Scholar to find articles concerning bankruptcy prediction in the conditions of Slovak Republic. We analyzed those articles to find models used for bankruptcy prediction by their authors or models mentioned with claims of their use in Slovakia and synthesized the results for this article.

Bankruptcy prediction models
After going through the current research on the topic of bankruptcy prediction we have chosen the following models as the most used and discussed in scientific literature in conditions of Slovak Republic.

Altman
One of the most prominent models used in Slovakia is the Altman model from 1968. Altman developed bankruptcy prediction model based on multivariate discriminant analysis (MDA) SHS Web of Conferences 9 2, 0 (2021) Globalization and its Socio-Economic Consequences 2020 The first Altman model in 1968 was for publicly traded companies. One of the later variants in 1983 was developed for companies that are not publicly traded, which is a more applicable to the conditions of the Slovak Republic. The discriminatory function for the 1983 variant is as follows: Altman models where used for example in research by Delina, Packova [8], Gavurova, Packova, Misankova, Smrcka, [9], Kovacova, Kliestikova [10], Camska [11], Misankova, Zvarikova, Kliestikova, [12] and many more. Adamko, Svabova [13] studied prediction ability of Global Altman's model on Slovak companies. Rybarova, Braunova, Jantosova [14] used Altman's model on a specific sector of economy, namely construction industry in Slovakia.

IN 05
IN05 is one of a family of indexes developed in Czech Republic by Neumaierova, Neumaier. It respects conditions in Czech Republic and IN05 is the latest from the family thus it is the one currently most used. The IN05 index is as follows: [15]

CH-index
CH-index is one of a few domestically developed models which was presented by Chrastinova in 1998 and developed for use mainly in agricultural sector, as it was developed on companies from this sector. It is based on discriminant analysis. [16] Discriminant function for CH-index is as follows: The interpretation of the Ch-index is as follows: [16] CH < -5 unhealthy -5 < CH < 2.5 grey zone 2.5 < CH healthy CH-Index is also used widely, albeit less than Altman or IN05. Karpac, Bartosova [17]; Durica, Svabova [18] or Camska [11] used it in their research for example.

G-index
Another model developed in Slovakia and also for the use in mainly agricultural companies is G-index, developed by L. Gurcik  G-Index is used similarly to CH-Index because of their similarity being based on agricultural companies. We can find it for examples in articles by Karpac, Bartosova [17]; Durica, Svabova [18] or Camska [11].

Gulka model
The Gulka's model is a relatively new model that was obtained using a logistic regression method on a sample of 120 854 Slovak companies. The math entry is as follows [20]: = Return on Assets from the perspective of EBITDA = (EBITDA / Total Assets; while EBITDA = Profit from economic activity + Depreciation + Residual cost of the sold long-term assets and material -Revenue from the sale of long-term assets and material) p = probability the company will go bankrupt during the next 12 months The evaluation is made as follows: if 1 ≥ p ≥ 0,50, an enterprise is heading to bankruptcy if 0,50 > p ≥ 0, the enterprise is not heading to bankruptcy Gulka's model is newer and it is rising in use. Klempaiova, Bohdalova [21] compared it with IN05 and their results showed Gulka's model to be more reliable. Also a comparison of bankruptcy prediction models by Durica, Svabova [18] showed Gulka's model to be the best in comparison with CH-index, G-index and Bonity Index.

Other models
One can find many other foreign models used in articles pertaining to the comparison of bankruptcy prediction models such as Zmijevski, Taffler, Fulmer or Springate model, such as used in Kovacova, Kliestikova [10]. However, these models are not made for the conditions of Slovak republic and due to the extent of this article and their usually bad predictive results when used on Slovak companies, we will not include them in this article.
Also, there are many new models constructed in recent years, however they are usually only proposed by the author of the article and are not used by anyone else. We can say they are expecting acceptance from the scientific community and we will be able to see their use and verification only in a few years time. It can be P' model by Delina [26] proposed models using logistic regression and probit regression.. Mas'ud et al. studied trust. [27]. Svabova and Durica [28] analyzed outliers.

Bankruptcy models for non-profit organizations
During our research for bankruptcy prediction models used in conditions of Slovakia, we identified only use of these models for assessment of financial health of non-profit organizations by Podhorska [29]. She compared 5 bankruptcy prediction models on a sample of 1230 Slovak non-profit organizations. The use of these models for prediction of financial health of non-profit organizations is complicated by the non-profit nature of the organizations, where most models use at least one variable that measures profitability like EBT, EBITDA, that are usually not present in non-profit organizations. We found only one model specificially constructed for non-profit organizations in Slovakia and it used neural networks. [30] 4 Discussion and conclusion In this article, we focused on bankruptcy prediction models in conditions of Slovakia. We enumerated chosen models and commented on their use in the current research. We also identified a great many new bankruptcy prediction models that were developed in recent years. Some of them might be accepted in near future by the scientific community and fulfil the need for a general bankruptcy prediction model tailored to the specific condition of Slovak Republic, as evidenced in Delina, Packová [8] or Kovacova, Kubala, Kliestik et al. [31]. So far, the literature doesn't show a widespread adaptation of any of the new models, neither their testing. It might me a valid question for future research to compare the newly proposed models on current data of Slovak companies.
There is also a present lack of financial distress prediction models for use in non-profit organizations, which might present a gap for potential future research.