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Prediction of financial failure of Saudi listed companies

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  • Abdullatif Mohamed. A Basheikh

Abstract

This study aims to test a range of financial ratios by using the discriminant and logistic regression models, to determine the accuracy of these models and their ability to predict the failure of Saudi listed companies. The comparison between the two models acts to determine which model is more appropriate for predicting failure of listed companies. Also the study facilitates determining which, financial ratios predict the financial failure of listed companies. The study is based upon data and information extracted from published annual reports of companies for the period 2005 to 2009. The main findings of the research are: 1) both discriminant and logistic regression models can predict the financial failure of Saudi listed companies before its occurrence.; 2) the return on equity and profit before Zakat and tax/total assets are considered as the two most important financial ratios, which help to predict the failure of Saudi listed companies.

Suggested Citation

  • Abdullatif Mohamed. A Basheikh, 2012. "Prediction of financial failure of Saudi listed companies," International Journal of Managerial and Financial Accounting, Inderscience Enterprises Ltd, vol. 4(2), pages 195-213.
    • Handle: RePEc:ids:injmfa:v:4:y:2012:i:2:p:195-213
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    Cited by:

    1. Layla Khoja & Maxwell Chipulu & Ranadeva Jayasekera, 2016. "Analysing corporate insolvency in the Gulf Cooperation Council using logistic regression and multidimensional scaling," Review of Quantitative Finance and Accounting, Springer, vol. 46(3), pages 483-518, April.

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