Discriminatory Power of the Altman Z-Score Model

This article aims to assess the discriminatory power of one of the most famous and most discussed corporate predictive models, the Altman Z-Score. This model ranks among the bankruptcy models, whose main purpose is to detect the impending bankruptcy in good time. The research focuses on three main areas of assessing the discriminatory power of the model. The first part deals with the overall discriminatory power of the model; the second part is aimed at quantifying the impact of individual variables on misclassification of enterprises in bankruptcy. The last part quantifies the discriminatory power of individual variables of the model. The results are compared with the findings of the author of the model. The empirical research is based on the accounting data of Czech companies from the manufacturing industry. Both thriving and bankrupt companies are included in the research.

Authors: Kateřina Mičudová
Keywords: altman, bankruptcy, nancial health, predictive model, Z- Score
Volume: 6
Issue: 1
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