Z-Score
“Can Altman Z-score Models Predict Business
Failures in Greece?”
Nikolaos Gerantonis
Department of Management and Business Administration
University of Piraeus, 4 Ag. Marinas Str, Greece
Konstantinos Vergos
PhD, Director of Research Department, Cyclos Securities S.A
39 Panepistimiou Str,10564, Athens, Greece
Apostolos G. Christopoulos
Corresponding Author
University of Athens, Department of Economics
5 Stadiou Str, Athens 105 62, Greece
E-mail: axristop@econ.uoa.gr
Abstract
This paper analyses whether Altman Z-score models, can predict correctly company failures. The empirical analysis examines all listed in the Athens Exchange companies, during the period 2002-2008 and discontinuations of operation for these companies during the same period. It is investigated whether Z-score models can predict bankruptcies for a period up to three years earlier. Our study shows that Altman model performs well in predicting failures. This is in line with other findings. The empirical results are interesting since they can be used by company management for financing decisions, by regulatory authorities and by portfolio managers in stock selection.
Keywords: Valuation, Altman, Regulation, Share price, Capital markets, bankruptcy
JEL Classification Codes: G33:G14
1. Introduction
1.1. Examined Issues
In the study it is examined whether z-score alone can predict business failure for the examined companies in the examined period. To examine this it is investigated whether z-scores one up to four years before bankruptcy can predict business failures or financial problems. The study is interesting for financial analysts and portfolio managers given that in the case that discriminant analysis is useful, they can use it for stock picking and asset allocation. Discriminant analysis can also be a valuable tool for investors. Companies with high probabilities to bankrupt should trade at a discount to their value. If this is correct, then this paper provides
Failures in Greece?”
Nikolaos Gerantonis
Department of Management and Business Administration
University of Piraeus, 4 Ag. Marinas Str, Greece
Konstantinos Vergos
PhD, Director of Research Department, Cyclos Securities S.A
39 Panepistimiou Str,10564, Athens, Greece
Apostolos G. Christopoulos
Corresponding Author
University of Athens, Department of Economics
5 Stadiou Str, Athens 105 62, Greece
E-mail: axristop@econ.uoa.gr
Abstract
This paper analyses whether Altman Z-score models, can predict correctly company failures. The empirical analysis examines all listed in the Athens Exchange companies, during the period 2002-2008 and discontinuations of operation for these companies during the same period. It is investigated whether Z-score models can predict bankruptcies for a period up to three years earlier. Our study shows that Altman model performs well in predicting failures. This is in line with other findings. The empirical results are interesting since they can be used by company management for financing decisions, by regulatory authorities and by portfolio managers in stock selection.
Keywords: Valuation, Altman, Regulation, Share price, Capital markets, bankruptcy
JEL Classification Codes: G33:G14
1. Introduction
1.1. Examined Issues
In the study it is examined whether z-score alone can predict business failure for the examined companies in the examined period. To examine this it is investigated whether z-scores one up to four years before bankruptcy can predict business failures or financial problems. The study is interesting for financial analysts and portfolio managers given that in the case that discriminant analysis is useful, they can use it for stock picking and asset allocation. Discriminant analysis can also be a valuable tool for investors. Companies with high probabilities to bankrupt should trade at a discount to their value. If this is correct, then this paper provides
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