ACCOUNTING AGILITY AND THE PREDICTION OF CORPORATE FAILURE

Purpose - The main objective of this paper is to provide evidence about corporate failure prognosis in a developed market such as Greece and identify new value-relevant variables concerned with the quality of financial statements and the managerial choice of accounting methods and techniques in order to enhance the accuracy of the corporate failure prediction models. Design/methodology/approach - In this paper multiple discriminant analysis, logit analysis and probit analysis are employed to construct models for the prediction of corporate failure. The impact of accounting agility and managerial discretion on the accuracy of the prediction models is explored. Findings - This study identifies new value-relevant predictor variables concerned with the choice of accounting methods and techniques and also provides evidence that these variables enhance the accuracy of the existing corporate failure prediction models. Practical implications - The existing corporate failure prediction models embody an endogenous flaw of the predictor variables that derives from the quality of financial statements and corporate agility concerned with the choice of accounting methods. Financial institutions should reexamine the efficiency of their methodologies concerned with their credit risk assessment. Originality/value - The results of the study will redirect Academia's attention towards future research and they will also assist regulatory authorities to reconsider the current framework concerning managerial discretion.