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Francesco Paolone, Selman Salim Kesgin

Purpose – This paper investigates the prediction of failure among Italian and Turkish manufacturing companies during the global crisis. The recent financial crisis has pushed many businesses, either large or small, into bankruptcy or near bankruptcy. Given two different economic environments (Italy in recession and Turkey in expansion) and potential future global economic downturns, there is an urgent need to deeper understand the reasons behind the Italian and Turkish corporate failure. The study aims to expand the domain of financial distress by including two countries with different economic scenario. Design/methodology/approach – This paper opted for applying the Revised Altman model in order to investigate the impact of the crisis on financial distress among Italian and Turkish manufacturing non-listed public limited companies. Companies are observed over the crisis period 2008- 2013. We allocate companies in one out of three areas: alarm, grey and safe. We suggest spreading the hybrid companies who fall in the grey area over the extreme areas. By setting a threshold, we group the companies in two different clusters: with financial distress and with no, with the intention of discovering hybrid companies at the intermediate level that necessitate financial backing. Findings – The results confirm our hypotheses: the great majority of Italian manufacturing companies (72.70%) have been suffering the downturn and, consequently, increasing the likelihood of financial distress. While only the 26.68% of Turkish companies have a reasonable risk of financial distress. The findings indicate that the majority of Italian manufacturing companies have been suffering the financial crisis, while Turkey shows an opposite situation. Research limitations/implications – Because of the chosen research methodology (Z-Scores), the research findings may be less reliable because they are strongly linked to Z-Scores. Therefore, researchers are encouraged to test dynamic models further. Practical implications – The paper includes implications for the impact of the recent economic crisis and the bankruptcy prediction in two countries which portrait opposite scenarios. Originality/value – This paper fulfils an identified need to study how the global financial impact on countries with opposite scenario.