ANALYSIS OF THE BANKRUPTCY RISK OF COMPANIES OWNED BY LOCAL GOVERNMENTS IN HUNGARY

Abstract

Local governments are responsible for the production of public goods and the provision of public services. These tasks are carried out with the help of enterprises owned by a local government. These kinds of firms dispose of the assets of local governments and theyimprove or extend them. Besides, they provide public services which are indispensable for the citizens. Public service quality determines the living standards of the inhabitants and the position of the settlement in the competition with other municipalities. Due to the developing IT-background and the improving statistical methods as well as thanks to the conti-nously growing demands, several models were established to define companies that were exposed to the danger of bankruptcy in the past few decades. Every model is based on figures derived from financial-accounting calculations. Although the future of a company can not be predicted using bankruptcy forecast models, it can be defined if the firm belongs to the group of bankrupt or surviving companies according to the financial-accounting figures. When conducting the research, financial-accounting figures of business companies owned by a local government were reviewed. 407 companies were assessed with 3 different kinds of bankruptcy prognosis models with regard to the business years 2006, 2011 and 2013. We have set the goal to evaluate which business companies owned by a local government suffered from insolvency in the three years in question. Our objective is to compare firms operating in different branches, check their size and collate enterprises of various municipality categories using the method of variety analysis.