The phenomenon of corporate failure is not infrequent nor of minor economic consequence. Especially, in Korea, the number of bankrupt companies increases extremely recent year under of currency crisis(IMF``s control). It is obvious that such a crucial issue in corporate finance warrants careful investigation. By the way, bankruptcy prediction is one of the business classification problems and business classification covers wide area of managerial decision making. It includes bankruptcy prediction, accounting method choice, bank loan classification, and bond rating, etc.
This study proposes the bankruptcy prediction model which is concentrated on information and telecommunications(IT) industry in Korea. Until now, many research have been studied for developing bankruptcy prediction model, but they are not focused specific industry area, specially IT industry. So, this study aims to investigate the difference causing to company failure between IT and non-IT industry in terms of some corporate financial ratios, ex ante.
Finally, as the result of this study, we notify following facts ; 1) in prediction of IT firms failure, the key factors to forecast are profitability, stability, and activity ratio, 2) on the other hand, in prediction of non-IT firms failure, we must observe all aspects of variables, including growth ratio, and 3) on IT firms`` forecasting, the variables concerned with activity are more important than case of non-IT firms, but the variables of growth ratio does not work in forecasting bankruptcy.
The contributions of this study may be summarized as follows ; 1) focusing on failure of IT firms in Korea, 2) using mutivariate discriminant analysis(MDA) method, this study suggests significant model, especially in control sample, which can be used in real world, and 3) comparing IT firms`` failure and non-IT firms``, we present specific factor in predicting bankruptcy of IT firms.