Altman’s Z-Score Models of Predicting Corporate Distress: Evidence from the Emerging Sri Lankan Stock Market
Lalith P. Samarakoon
University of St. Thomas
Journal of the Academy of Finance, vol. 1, pp. 119-125, 2003
This study investigates the ability of three versions of Altman’s Z-Score model (Z, Z’, and Z”) of distress prediction developed in the U.S. to predict the corporate distress in the emerging market of Sri Lanka. The results show that these models have a remarkable degree of accuracy in predicting distress using financial ratios computed from financial statements in the year prior to distress. The overall success rate of 81% is observed using the Z”-Score. The out-of-sample evidence provided in this paper means that the Z-Score models seem to have a very good potential in evaluating the risk of corporate distress in smaller emerging markets as well.
Number of Pages in PDF File: 11
Keywords: Altman Z, Distress prediction, Ratios, Emerging markets, Sri Lanka
JEL Classification: G15, G32, G33Accepted Paper Series
Date posted: May 13, 2009 ; Last revised: February 16, 2010
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