Keywords
How to Cite
Abstract
The study aims to compare the classification power of three statistical failure prediction models: Altman model 1968, Kida model, and Zmijewski. The purpose is to evaluate the financial performance of Saudi listed firms. The study sample consists of 122 listed industrial companies on the Saudi Stock Exchange for the period from 2014 to 2016. The results show that Zmijewski model is a more powerful tool in predicting the financial performance of Saudi listed firms than Altman model (1986), and Kida model. In addition, the results show that there are statistical relationships between some ratios included in the three models and the financial performance of industrial companies, which was measured by EPS. The study recommended users of financial statements of Saudi listed companies use Zmijewski model, which performs well in evaluating their financial position to be used when making financial decisions.
References
Adam, M. H. M. (2014). Evaluating the Financial Performance of Banks using financial ratios-A case study of Erbil Bank for Investment and Finance. European Journal of Accounting Auditing and Finance Research, 2(2), 156-170.
Aharony, J., Jones, C. P., &Swary, I. (1980). An analysis of risk and return characteristics of corporate bankruptcy using capital market data. The Journal of Finance, 35(4), 1001-1016. https://doi.org/10.1111/j.1540-6261.1980.tb03516.x
Al Karim, R., &Alam, T. (2013). An evaluation of financial performance of private commercial banks in Bangladesh: Ratio analysis. Journal of Business Studies Quarterly, 5(2), 65.
Alareeni, B. (2019). A Review of Auditors’ GCOs, Statistical Prediction Models and Artificial Intelligence Technology, International Journal of Business Ethics and Governance, 2(1), pp. 19-31. https://doi.org/10.51325/ijbeg.v2i1.30
Alareeni, B. and Alqallaf, H. (2018). Evolving of Selected Integrated Reporting Capitals among Listed Bahraini Banks. International Journal of Business Ethics and Governance, 1(1), pp. 15-36. https://doi.org/10.51325/ijbeg.v1i1.10
Alareeni, B. (2018). Does corporate governance influence earnings management in listed companies in Bahrain Bourse?, Journal of Asia Business Studies, 12(4), 551-570. https://doi.org/10.1108/JABS-06-2017-0082
Alareeni, B., & Branson, J. (2013). Predicting Listed Companies' Failure in Jordan Using Altman Models: A Case Study. International Journal of Business and Management, 8(1), 113. https://doi.org/10.5539/ijbm.v8n1p113
Alifiah, M. N., Salamudin, N., & Ahmad, I. (2013). Prediction of financial distress companies in the consumer products sector in Malaysia. Jurnal Teknologi, 64(1), 85-91. https://doi.org/10.11113/jt.v64.1181
Al-Kassar, T. A., & Soileau, J. S. (2014). Financial performance evaluation and bankruptcy prediction (failure). Arab Economic and Business Journal, 9(2), 147-155. https://doi.org/10.1016/j.aebj.2014.05.010
Alkhatib, K., & Al Bzour, A. E. (2011). Predicting corporate bankruptcy of Jordanian listed companies: Using Altman and Kida models. International Journal of Business and Management, 6(3), 208. https://doi.org/10.5539/ijbm.v6n3p208
Almansour, B. Y. (2015). Empirical model for predicting financial failure. American journal of economics, finance and management, 1(3), 113-124.
Altman, E. I. (1968). Financial ratios, discriminant analysis and the prediction of corporate bankruptcy. The journal of finance, 23(4), 589-609. https://doi.org/10.1111/j.1540-6261.1968.tb00843.x
Altman, E. I. (2000). Predicting financial distress of companies: revisiting the Z-score and ZETA models. Stern School of Business, New York University, 9-12.
Altman, E. I., & Hotchkiss, E. (2006). Corporate Credit Scoring-Insolvency Risk Models, in Corporate Financial Distress and Bankruptcy. https://doi.org/10.1002/9781118267806
Andrade, G., & Kaplan, S. N. (1998). How costly is financial (not economic) distress?Evidence from highly leveraged transactions that became distressed. The Journal of Finance, 53(5), 1443-1493. https://doi.org/10.1111/0022-1082.00062
Bani, M., Zadehbagher, M., Jalili, J., &Saberimanesh, M. A. (2014). Prediction of Bank Failures Based on Zmisky and Toffler Models in the Banking Industry of Iran. Kuwait Chapter of the Arabian Journal of Business and Management Review, 3(12), 142. https://doi.org/10.12816/0018813
Beaver, W. H. (1966). Financial ratios as predictors of failure. Journal of accounting research, 71-111. https://doi.org/10.2307/2490171
Bhunia, A., & Sarkar, R. (2011). A study of financial distress based on MDA. Journal of Management Research, 3(2), 1. https://doi.org/10.5296/jmr.v3i2.549
Central Intelligence agency https://www.cia.gov./library/publication/the-world-factbook/geos/sa.htm
Chadha, P. (2016). Financial Performance of Companies listed on the Kuwait Stock Exchange. An Exploration using Altman’s Z-Score Model. Anchor Academic Publishing. https://doi.org/10.4172/2162-6359.1000341
Chancharat, N., Davy, P., & McCrae, M. (2007). Examining Financially Distressed Company in Australia: The Application of Survival Analysis. In EABR (Business & ETLC (teaching) Conference Proceedings.
Gilbert, L. R., Menon, K., & Schwartz, K. B. (1990). Predicting bankruptcy for companies in financial distress. Journal of Business Finance & Accounting, 17(1), 161-171. https://doi.org/10.1111/j.1468-5957.1990.tb00555.x
Grammatikos, T. H. E. O. H. A. R. R. Y., &Gloubos, G. E. O. R. G. E. (1984). Predicting bankruptcy of industrial companies in Greece. Spoudai, 33, 3-4.
Grünberg, M., &Lukason, O. (2014). Predicting bankruptcy of industrial companies. International Journal of Trade, Economics and Finance, 5(1), 93. https://doi.org/10.7763/IJTEF.2014.V5.347
Gyimah, P., &Boachie, W. K. Portability of Multiple Discriminant Analysis Prediction Model of Listed Firms: An Emerging Market Perspective.
Ijaz, M. S., Hunjra, A. I., Hameed, Z., &Maqbool, A. (2013). Assessing the financial failure using Z-Score and current ratio: A case of sugar sector listed companies of Karachi Stock Exchange.
Januri Januri, S. E., & MM, M. S. (2018). The Analysis of the Bankruptey Potential Comparative by Altman Z-Score, Springate and Zmijewski Methods at Cement Companies Listed in Indonesia Stock Exchange. KUMPULAN JURNAL DOSEN UNIVERSITAS MUHAMMADIYAH SUMATERA UTARA.
Ježovita, A. (2015). Designing the model for evaluating business quality in Croatia. Management: journal of contemporary management issues, 20(1), 101-129.
Karels, G. V., & Prakash, A. J. (1987). Multivariate normality and forecasting of business bankruptcy. Journal of Business Finance & Accounting, 14(4), 573-593. https://doi.org/10.1111/j.1468-5957.1987.tb00113.x
Kheirabadi, H. S., Nezhad, M. B., &Azhdar, M. (2016). Financial Performance Evaluation and Prediction of the Financial Crisis on Companies Listed on the Tehran Stock Exchange. International Business Management, 10(19), 4549-4555.
L Bani, M., Zadehbagher, M., Jalili, J., &Saberimanesh, M. A. (2014). Prediction of Bank Failures Based on Zmisky and Toffler Models in the Banking Industry of Iran. Kuwait Chapter of Arabian Journal of Business and Management Review, 3(12), 142-152. https://doi.org/10.12816/0018813
Lakshan, A. M. I., &Wijekoon, W. M. H. N. (2013). The use of financial ratios in predicting corporate failure in Sri Lanka. GSTF Business Review (GBR), 2(4), 37.
Mahama, M. (2015). Assessing the state of financial distress in listed companies in Ghana: Signs, sources, detection and elimination–A Test of Altman’s Z-Score.
Mamo, A. Q. (2011). Applicability of Altman (1968) model in predicting financial distress of commercial banks in Kenya. PhD diss.
Mohammed, A. A. E., & Kim-Soon, N. (2012). Using Altman's model and current ratio to assess the financial status of companies quoted in the Malaysian stock exchange. International Journal of Scientific and Research Publications, 2(7), 1-11.
Opler, T. C., & Titman, S. (1994). Financial distress and corporate performance. The Journal of Finance, 49(3), 1015-1040. https://doi.org/10.1111/j.1540-6261.1994.tb00086.x
Pervan, I., Pervan, M., &Vukoja, B. (2011). Prediction of company bankruptcy using statistical techniques–Case of Croatia. Croatian Operational Research Review, 2(1), 158-167.
Purnanandam, A. (2008). Financial distress and corporate risk management: Theory and evidence. Journal of Financial Economics, 87(3), 706-739. https://doi.org/10.1016/j.jfineco.2007.04.003
Rahimipoor, A. (2013). A comparative study of bankruptcy prediction models of Fulmer and Toffler in companies accepted in Tehran Stock Exchange. Journal of Novel Applied Sciences, 2(10), 522-527.
Uchenna, A. W., &Okelue, U. D. (2012). Predicting Corporate Business Failure in the Nigerian Manufacturing Industry. European Journal of Business and Management, 4(10), 86-94.
Whitaker, R. B. (1999). The early stages of financial distress. Journal of Economics and Finance, 23(2), 123-132. https://doi.org/10.1007/BF02745946
Yap, B. C. F., Yong, D. G. F., & Poon, W. C. (2010). How well do financial ratios and multiple discriminant analysis predict company failures in Malaysia? International Research Journal of Finance and Economics, 54(13), 166-175.
This work is licensed under a Creative Commons Attribution 4.0 International License.
Copyright (c) 2020 Array