Prediction of Agricultural Enterprises Distress Using Data Envelopment Analysis

The question of predicting the corporate financial distress has critical importance for all stakeholders. It is one of reasons, why the widespread attention in financial disciplines for this topic has been paid. Uncertainty and specificity of the current business environment in agriculture sector, as well as the rising criticism of well-known techniques, caused a tendency to test new approaches in corporate failure prediction. This paper focuses on a relatively new approach Data Envelopment Analysis (DEA), which is typically used to assess the efficiency of decision-making units. The main purpose of this paper is to employ alternative DEA approach for corporate failure prediction. Analysis is applied on financial data for Slovak enterprises from the agriculture sector. The selection of appropriate financial ratios is based on the relevant literature and refers to the key ratios of bankruptcy models specified for agriculture enterprises. Our findings demonstrate aspects of application alternative DEA approach as a corporate prediction tool, and the ways of identification enterprises with high chance of potential bankruptcy. The article also offers several potential areas for the further analysis.