Contextualizing Bankruptcy Prediction Models in Emerging Economies: A Sector-Specific Analysis of Georgia’s Construction Industry

This article evaluates the applicability of classical bankruptcy prediction models in the context of an emerging economy by focusing on Georgia’s construction sector. Using audited financial data from 42 companies during 2020-2023, the study compares Altman’s Z-Score, Springate, and Zmijewski models and enhances them with two locally relevant indicators - Liquidity Ratio (LR) and Financial Independence Ratio (FIR). These are synthesized into an Integrated Index (II) using weighted aggregation (0.30·Altman + 0.20·Springate + 0.20·Zmijewski + 0.15·LR + 0.15·FIR) to capture sector-specific solvency and capital structure features. The results reveal significant inconsistencies across classical models, while the integrated approach improves predictive coherence and contextual accuracy. Despite moderate cyclical fluctuations, the construction sector remained largely stable, with financial distress concentrated among smaller firms. The findings highlight the necessity of contextual model adaptation in transitional economies and provide practical insights for credit risk assessment and policy design.