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Anticipating Bankruptcy for Non-financial Sector Firms: A Case of Pakistan

Author

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  • Ur Rehman, Sana
  • Baloch, Hani
  • Qayyum, Abdul

Abstract

Purpose: This paper attempts to identify the relevance and strength of financial ratio based analysis models called Z-Score and O-Score for bankruptcy determination of non-financial sector of Pakistan. The study aims to suggest a best model for future researchers and analysts to predict company’s bankruptcy.Design/Methodology/Approach: Comparative analysis is employed to determine the accuracy of bankruptcy predictability by considering the sample of 20 bankrupt/suspended non-financial Pakistani firms during 2015 to 2017.Findings: Result estimates of both models show that both models are significant predictors when applied to Pakistan’s nonfinancial sector firms. There is no significant difference in respective predictive abilities. Subsequently this analysis suggests that instead of applying both the models future analyses and researchers can directly select any one of the model to predict survival of the firm.Implications/Originality/Value: Financial analysts may select any one among Z-Score and O-Score models for bankruptcy prediction.

Suggested Citation

  • Ur Rehman, Sana & Baloch, Hani & Qayyum, Abdul, 2021. "Anticipating Bankruptcy for Non-financial Sector Firms: A Case of Pakistan," Journal of Accounting and Finance in Emerging Economies, CSRC Publishing, Center for Sustainability Research and Consultancy Pakistan, vol. 7(2), pages 409-417, June.
    • Handle: RePEc:src:jafeec:v:7:y:2021:i:2:p:409-417
    DOI: http://doi.org/10.26710/jafee.v7i2.1730
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