Distressed Firm and Bankruptcy prediction in an international context

Original by Altman, Malgorzata, 2014, 47 pages 

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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