Logit and Probit Model used for Prediction of Financial Health of Company

Corporate failure can exist in various types and dimensions, and has different effects on stakeholders according to magnitude of the failure and its type. The rise of corporate failure in different types brought about the use of different definitions and different concepts connoting failure. Over the past 35 years, the topic of “business failure prediction” has developed to a major research domain in corporate finance. Many academic studies have been dedicated to the search for the best corporate failure prediction, based on publicly available data and statistical techniques. This article will be focus on techniques used for prediction of bankruptcy such as logit and probit analysis.