Distressed Firm and Bankruptcy prediction in an international context

Original by Altman, Malgorzata, 2014, 47 pages

This summary note was posted on 16 January 2017, by Reinie in Credit risk Finance

Resumes Atlman Z-score history
Z’’-score does not take explicitly account of the age of a firm. However Altman (1983) noted that the age of a firm is implicitly considered in the retained earnings/total asset ratio that was regarded as a new ratio of bankruptcy.
Relatively young firms will probably show low ratio because they didn’t have time to build up cumulative profits
Evidence form this study shows that the original Z’’-score performs well in an international context. More efficiency can however be extracted from country level using the four original variables plus additional background variables

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