The Bankruptcy Prediction Model of Technology Innovation Small Medium Enterprises : Principal Component Analysis Approach

This paper analyzes a bankruptcy prediction model for technology innovation SMEs. Using principal component analysis and logit analysis with bankrupt and non-bankrupt firms for 2005～2007 we investigate the effect of 16 technology level variables, 6 macroeconomic variables, and 6 firm environmental variables of SMEs on the likelihood of bankruptcy. According to empirical results we find that the predictive power of technology level variables is 72.9% while macroeconomic variables explain 65.3%. In addition, firm environmental variables slightly improve explanatory power by 3.1%.