Smes crises and forecasting tools. An application to Italian environment

This paper aims to ascertain if two score-based warning tools (Z’-Score and BCS) can correctly predict the failure of industrial non listed SMEs in Italy. First, we have analyzed the theoretical and practical characteristics of the two models. Second, we have examined a sample of 200 industrial SMEs, of which 100 companies have been subjected in the period 2005-2015 in bankruptcy proceedings because of a default, whereas the remaining 100 companies, which have been selected based on same core business, year of data collection and a comparable size of total assets, did not go bankruptcy. The models were tested by verifying ex-post whether the future health status of the businesses in the sample, and the impending business failures specifically, could have been predicted up to four years earlier and with reasonable precision using the examined models.