Considering the Utility of Altman's Z-Score as a Strategic Assessment and Performance Management Tool

Strategy & Leadership, Vol. 35, No. 5, pp. 37-43, 2007

Posted: 12 Sep 2007

See all articles by Joseph Calandro, Jr.

Joseph Calandro, Jr.

Fordham University - Gabelli Center for Global Security Analysis

Abstract

Purpose: The purpose of this article is to provide commentary on the utility of Altman's Z-score as a strategic assessment and performance management tool. This possibility is suggested in the recently published book Measuring Organizational Performance - Metrics for Entrepreneurship and Strategic Management Research (Northampton, MA: Edward Elgar, 2006) by Robert B. Carton and Charles W. Hofer.

Design/methodology/approach: This paper is a corporate manager's analysis of the utility of Altman's Z-score as a strategic assessment and performance management tool based on published research, with suggestions for further research.

Findings: The analysis supports Carton and Hofer's findings with respect to the utility of the Z-score as a strategic assessment and performance management tool.

Practical and research implications: While the Z-score is both popular and widely used in the fields of credit risk analysis, distressed investing, M&A target analysis, and turnaround management it has received relatively little attention as a strategic assessment and performance management tool. The findings of Carton and Hofer's study, in conjunction with the impressive results achieved by GTI Corporation, suggest that applying the Z-score in strategy and performance management may also be warranted, especially after more research is undertaken.

Originality/value: This article offers a manager's perspective on new research that indicates the potential of a popular financial distress metric to provide insight in the areas of entrepreneurship and strategic management.

Keywords: Performance Measurement, Z-score, Strategy

JEL Classification: G30, L20, M10

Suggested Citation

Calandro, Jr., Joseph, Considering the Utility of Altman's Z-Score as a Strategic Assessment and Performance Management Tool. Strategy & Leadership, Vol. 35, No. 5, pp. 37-43, 2007. Available at SSRN: https://ssrn.com/abstract=1013304

Joseph Calandro, Jr. (Contact Author)

Fordham University - Gabelli Center for Global Security Analysis ( email )

531 Hughes Hall
441 E. Fordham Rd
Bronx, NY 10458
United States

HOME PAGE: http://www.linkedin.com/in/josephcalandro/

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