Innovative Applications of O.R.Corporate failure prediction in the European energy sector: A multicriteria approach and the effect of country characteristics

•Comprehensive corporate failure prediction models for the EU energy sector.•Development of multicriteria models with ordinal and nominal data.•Energy-related data are important for failure risk analysis in the energy sector.

This study examines the development of corporate failure prediction models for European firms in the energy sector, using a large dataset from 18 countries. The construction of the models is based on a multiple criteria decision aid (MCDA) approach taking into account both ordinal criteria and nominal country-sector effects. The analysis is based on different modeling specifications. First, traditional financial variables are examined, which are then extended with additional country-level data related to the economic and business environment, as well as data about the energy efficiency policies of the countries and the characteristics of their energy markets and networks. The results indicate that energy-related attributes have high discriminating power and add valuable information compared to the other attributes.