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Predikční schopnost Altmanova Z-skóre evropských soukromých společností
[Predictive Ability of Altman Z-score of European Private Companies]

Author

Listed:
  • Svatopluk Kapounek
  • Jan Hanousek
  • František Bílý

Abstract

The paper investigates the relationship between the financial distress of European private companies identified by the Altman Z-score and real bankruptcy. We extend the traditional Z-score with the asymmetric effect of economic activity. Our results show higher forecasting performance of the Altman Z-score of large companies in a three-year projection. We argue that our results differ from Altman (1968) because of specific market conditions in Europe that enable prolongation of activity after financial distress is identified. We also emphasize the role of liquidity, size, performance and indebtedness in increasing financial distress forecasting performance. Finally, we extend our prediction model with selected indicators of quality and development of the institutional environment.

Suggested Citation

  • Svatopluk Kapounek & Jan Hanousek & František Bílý, 2022. "Predikční schopnost Altmanova Z-skóre evropských soukromých společností [Predictive Ability of Altman Z-score of European Private Companies]," Politická ekonomie, Prague University of Economics and Business, vol. 2022(3), pages 265-287.
    • Handle: RePEc:prg:jnlpol:v:2022:y:2022:i:3:id:1353:p:265-287
    DOI: 10.18267/j.polek.1353
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    References listed on IDEAS

    as
    1. Altman, Edward I., 2005. "An emerging market credit scoring system for corporate bonds," Emerging Markets Review, Elsevier, vol. 6(4), pages 311-323, December.
    2. Altman, Edward I. & Haldeman, Robert G. & Narayanan, P., 1977. "ZETATM analysis A new model to identify bankruptcy risk of corporations," Journal of Banking & Finance, Elsevier, vol. 1(1), pages 29-54, June.
    3. Jarko Fidrmuc & Svatopluk Kapounek & Martin Siddiqui, 2017. "Which Institutions Are Important for Firms Performance? Evidence from Bayesian Model Averaging Analysis," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 64(4), pages 383-400, September.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Firm bankruptcy; financial distress; Altman Z-score; institutional environment;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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