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Author(s) / Editor(s): 
  • María Fernanda Meneses-González,
  • Javier Eliecer Pirateque-Niño,
  • Santiago David Segovia-Baquero

Early warning indicators for the private corporate sector in Colombia

The series Borradores de Economía (Working Papers on Economics) contributes to the dissemination and promotion of the work by researchers from the institution. On multiple occasions, these works have been the result of collaborative work with individuals from other national or international institutions. This series is indexed at Research Papers in Economics (RePEc). 

Publicado el: 
Thursday, 18 July 2019

The opinions contained in this document are the sole responsibility of the authors and do not commit Banco de la República or its Board of Directors

 

ABSTRACT

This paper assesses the usefulness of some financial variables in predicting episodes of vulnerability for the private corporate sector in Colombia. We analyse the evolution of several indicators for firms that have experienced episodes of distress. Additionally, we validate the predictive power of our indicators by using in-sample and out-of-sample tests. The results suggest that the ratio of financial obligations to assets, as well as a measure of debt-to-cashflow provide better information. Likewise, we find that classifying the firms by economic sector and the use of several variables at the same time improve the ability to detect changes in the financial health of firms.