DEA as a tool for bankruptcy assessment: the agribusiness case study

Bankruptcy assessment provides valuable information for the governments and investors to base their decisions in order to prevent possible financial losses. Data envelopment analysis (DEA) has generally been used to assess relative efficiency of decision making units. Recently, several approaches have appeared that reformulate DEA as a bankruptcy prediction tool. However, only several studies have been published on evaluation of suggested approaches and, if so, the focus was given to manufacture industry and IT industry only. In this paper we discuss the possibility of application of recent results in DEA bankruptcy prediction models in a specific field of agribusiness. Using the AMADEUS database, the Czech Farm Accountancy Data Network (FADN CZ) and the financial statements issued in the Czech Business Register, we collect primary data set on the Czech agriculture firms financial performance, apply the DEA based model, evaluate the results obtained and discuss the prediction power of the approaches in the agriculture industry.