We give an overview of the shortcomings of the most frequently used statistical techniques in failure prediction modelling. The statistical procedures that underpin the selection of variables and the determination of coefficients often lead to ‘overfitting'. We also see that the ‘expected signs' of variables are sometimes neglected and that an underlying theoretical framework mostly does not exist. Based on the current knowledge of failing firms, we construct a new type of failure prediction models, namely ‘simple-intuitive models'. In these models, eight variables are first logit-transformed and then equally weighted. These models are tested on two broad validation samples (1 year prior to failure and 3 years prior to failure) of Belgian companies. The performance results of the best simple-intuitive model are comparable to those of less transparent and more complex statistical models.

One of the prevalent concerns in present times, for both management academics and practitioners, relates to the principles which determine corporate success and failure. Although many models discover early symptoms of failure by using financial information, there is a lack of a deeper insight into the real causes of company failure and into the way they influence each other. The symptoms one can discover in the annual accounts are the consequence of a process that generally started long before. This case study of IFoil, once a leading European producer of industrial foils, biodegradable packing materials and bin bags, describes the rise and fall of a firm with an ambitious but risky strategy. This strategy proceeded from a management buy-out in 1996 and ended with a failure in 2003. In the case, we aim to analyse and describe IFoil's causes of failure and failure path in detail.

This textbook on Corporate Finance deals with the different sources of funding and the capital structure of corporations (excluding financial institutions), the decisions that managers can take to increase enterprise value as well as the tools and analysis used to allocate financial resources. The authors link theoretical insight to practical cases. The objectives and functions of corporate finance are discussed in an introductory chapter. The following chapters cover: fundamental financial valuation principles, investment analysis and the minimum investment return requirement, capital structure and dividend policy, long-term and medium-term financing, working capital as well as some specific financial topics such as valuation of companies, international financial policy, financing of growth companies, mergers and acquisitions, etc. While written for students, this book is also appealing to financial professionals such as financial directors, credit rating agencies, corporate managers in financial institutions as well as accountants and auditors.