Predicting bankruptcy of companies based on the production function parameters

In this paper we want to determine economic performance of the sample of companies using four-parametric production function. The available microeconomic data set was obtained by the secondary research utilising database Amadeus and financial statements issued in the Business Register of the Czech Republic. We focus on business entities within the agribusiness industry sector that is in comparison with other sectors considered to be the economically weakest one. The initial part of the work deals with identification of proper economic indicators of respective business entities which can be used as input factors of production function. To the estimation and testing of production function parameters is necessary to use nonlinear techniques, including preliminary estimation of parameters (among others conditional linearity approach) and iterative procedure of parameters estimation (the Newton-Rhapson algorithm). The results are compared to the well-known method of bankruptcy prediction, the Altman model based on stepwise discriminant analysis (Z-score).