مجلة مفاهيم
Volume 4, Numéro 1, Pages 377-409
2021-04-06

Measuring And Predicting The Risk Of Potential Company’s Financial Failure By Using Sherrod’s Model: An Applied And Analytical Study Of A Sample Of Commercial Banks Of The Iraqi Banking Sector

Authors : Fatah Rezhin Dhahir .

Abstract

Abstract The risk of financial failure is one of the most important financial matters of companies in the world due to the complexity in the business environment. Commercial banks seriously concern about the risk of bankruptcy that may face them during day to day financial activities. Hence, it is crucial for banks to be able to measure and predict any risk exposed them. In this regards, this study attempts to empirically test commercial banks listed on Iraqi stock exchange to predict the financial failure as early as possible if exist by depending on applying Sherrod model because empirical test will help all concern parties to assess the level of risk and the ability of the firm for continuation and survival. The study sample includes ten commercial banks listed on Iraqi stock exchange for the period of 2014-2018. The result reveled that in average, five of the banks in the study sample pose strong financial position with sufficient liquidity to meet obligations with no any threat of bankruptcy, while there is only one bank during the period with very little potentiality to the risk of bankruptcy. The result also showed that the risk prediction of bankruptcy is difficult in respect of four banks in the study sample. Finally, based on the model implemented, there is no any bank that expose to the risk of bankruptcy in a high extent.

Keywords

Financial bankruptcy ; Sherrod model ; Financial failure prediction