The predictability of economic and accounting factors in crisis period: Evidence from Greece

Given the increased number of economic crises in last decades, the predictability of them is composing an important area for research and there are a lot of essays about that. Some of them examined predictability using financial and accounting information in addition to various economic indicators such as interest rates and spreads, stock prices, exchange rates (Estrella A. and Mishkin F., 1998), leverage and GDP (Schularick M. and Taylor A. 2012).

The examination of the predictability of accounting information with the predictability of macroeconomic indicators is very important because, both, private firms and governments may use various practices to improve their financial and economic health. The accounting practices and earnings management allow the firms to improve financial health even in crisis periods. Also governments may use statistics or other practices to improve macroeconomic indicators.

One of the most important examples in recent years is the case of Greece and the unpredictability of the crisis by the government and by related organizations in the European Union. This is a very interest research field.

This essay examines whether the economic crisis in Greece was forecastable on the basis of the available accounting information from income statements of the firms (listed and not listed) with some other ratios and major economic indicators using predictive models.

The results are expected to show the possibility of predicting the crisis under the condition of proper compliance with accounting principles in the private and public sectors and avoiding political mistakes such as the acceptance of tax evasion and zero control of government expenditures.

Key Words: Economic Crisis, Prediction Model, Accounting Information