Abstract
This article presents a financial scoring model estimated on Czech corporate accounting data, i.e. it is based on an empirical experience of an emerging market. Seven financial indicators capable of explaining business failure at a 1-year prediction horizon are identified through a logit analysis.
Using the model estimated in this way, an aggregate indicator of the creditworthiness of the Czech corporate sector (named as JT index) is then constructed and its evolution over time is shown. This indicator aids the estimation of the risks of this sector going forward and broadens the existing analytical set-up used by the Czech National Bank for its financial stability analyses.
The results suggest that the creditworthiness of the Czech corporate sector steadily improved between 2004 and 2006, but slightly deteriorated in 2007 what could be explained through global market turbulences. The used methodology might be suitable for decision makers in emerging markets when evaluating the economy's financial stability.