A review of empirical analysis of Altman’s Z-score

• Resumes Atlman Z-score history
• Z’’-score does not take explicitly account of the age of a firm. However Altman (1983) noted that the age of a firm is implicitly considered in the retained earnings/total asset ratio that was regarded as a new ratio of bankruptcy.
• Relatively young firms will probably show low ratio because they didn’t have time to build up cumulative profits
• Evidence form this study shows that the original Z’’-score performs well in an international context. More efficiency can however be extracted from country level using the four original variables plus additional background variables