Business Failure Prediction Using Exponential Smoothing Forecasting and Pattern Recognition

Although some of these methods lead to models with a satisfactory ability to discriminate between healthy and bankrupt firms, they suffer from some limitations, often due to only give an alarm, but cannot forecast. This is why we have undertaken a research aiming at weakening these limitations. We propose an Exponential Smoothing Forecasting and Pattern Recognition (ESFPR) approach and illustrate how ESFPR can be applied to business failure prediction modeling. The results are very encouraging, and prove the usefulness of the proposed method for bankruptcy prediction.