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Year 2024, , 9 - 15, 02.06.2024
https://doi.org/10.17261/Pressacademia.2024.1892

Abstract

References

  • Altman, E. I. (1968). Financial Ratios, Discriminant Analysis and The Prediction of Corporate Bankruptcy. The Journal of Finance, 23(4), 589-609.
  • Avenhuis, J.O., (2013). Testing the generalizability of the bankruptcy prediction models of Altman, Ohlson and Zmijewski for Dutch Listed and large Non-Listed Firms. Journal of Business Administration, 11, 38-39.
  • Chadha, P. (2016). Exploring the financial performance of the listed companies in Kuwait Stock Exchange using Altman’s Z-score model. International Journal of Economics & Management Sciences, 5(3), 3-18.
  • Edi, E., & Tania, M. (2018). Ketepatan Model Altman, Springate, Zmijewski, dan Grover dalam Memprediksi Financial Distress. Jurnal Reviu Akuntansi dan Keuangan, 8(1), 79-92.
  • Hassan, M.K., & Haque, M.N (2018). Comparative evaluation of Altman’s Z Score, Ohlson’s O score and Zmijewski X score models in predicting corporate bankruptcy in Bangladesh. Asia Journal of Finance & Accounting, 10(2), 67-77.
  • Husein, M. F., & Pambekti, G. T. (2014). Precision of the models of Altman, Springate, Zmijewski, and Grover for predicting the financial distress. Journal of Economics, Business, and Accountancy Ventura, 17(3), 405-416
  • Fatmawati, M. (2012). Penggunaan The Zmijewski Model, The Altman Model dan The Springate Model Sebagai Prediktor Delisting Jurnal Keuangan dan Perbankan, 16(1), 56-65.
  • Fauzan, H., & Sutiono, F. (2017). Perbandingan Model Altman Z-Score. Z-mijewski, Springate, dan Grover Dalam Memprediksi Kebangkrutan Perusahaan Perbankan (Studi Kasus Pada BEI Tahun 2011–2015). Jurnal Online Insan Akuntan, 2(1), 49-60
  • Fauzi, S. E., Sudjono, & Saluy, A. B. (2021). Comparative analysis of financial sustainability using the Altman Z-score, Springate, Zmijewski and Grover models for companies listed at Indonesia Stock Exchange sub-sector telecommunication period 2014–2019. Journal of Economics and Business, 4(1), 23-39.
  • Lutfiyyah, I., & Bhilawa, L. (2021). Analisis Akurasi Model Altman Modifikasi (Z”-Score), Zmijewski, Ohlson, Springate dan Grover Untuk Memprediksi Financial Distress Klub Sepak Bola. Jurnal Akuntansi, 13(1), 46–60.
  • Manufacturing and Mining Sectors Business Tendency Survey: 2nd Quarter 2022 Report. Accessed on 25th April 2023 from: https://www.zimstat.co.zw
  • Melina, M., & Kalinggo, A. G. (2023). The effect of Altman, Grover and Zmijewski Models in predicting the financial distress of coal companies listed on the Indonesia Stock Exchange. International Journal of Social, Policy and Law, 4(1), 69-79.
  • Noor Salim, M & Ismudjoko, D.(2021). An analysis of financial distress accuracy models in Indonesia coal mining industry: An Altman, Springate, Zmijewski, Ohlson and Grover approaches. Journal of Economics, Finance and Accounting Studies, 3(2), 1–12.
  • Ndlovu, R. (2019). Nearly 100 Zimbabwe companies close down. Retrieved April 25, 2023, from https://timelive.co.za/sunday-times/news/2019/-02-17-nearly-100-zimbabwe-companies-close-down.
  • Rovira, E., & Blasco, J.L. (2016). Financial distress prediction models: A study of Spanish firms. Revista Iberoamericana de Contabilidad de Gestion, 14(27), 1-15.
  • Salim, N. M. (2016). Potensi Kebangkrutan Perusahaan Pertambangan Batubara Terdaftar di BEI dengan Pendekatan Model Altman, Springate dan Zmijewski Periode 2011-2014.
  • Salim, N.M., & Sudiono (2017). An analysis of bankruptcy likelihood on coal mining listed firms in The Indonesian Stock Exchange: An Altman, Springate And Zmijewski Approaches. Eurasian Journal of Economics and Finance, 5(3), 99-108.
  • Supitriyani, Astuti, & Azwar, K. (2022). The implementation of Springate, Altman, Grover and Zmijewski Models in measuring financial distress. International Journal of Trends in Accounting Research, 3(1), 1-8.
  • The CZI State of Manufacturing Survey. Accessed on 25th April 2023 from: https://www.czi.ac.zw/the-czi-state-of -manufacturing-survey/
  • Watts, R. L. (2003). Conservatism in Accounting Part I: Explanations and Implications. Accounting Horizons 17, 207–221. Simon School of Business University of Rochester.
  • Wang, H., & Huang, L. (2017). Evaluation of financial distress prediction models in Chinese listed companies. Journal of Applied Accounting Research, 18(2), 178-203.
  • Winarso, E., &; Edison, T. A. (2020). Comparison of modified Altman Z"-score model, Zmijewski X-score model, Grover G-score model, and Springate S-score model to analyze the accuracy of bankruptcy predictions: (Study on Automotive Complementary Industry Sector Manufacturing Companies Listed on IDX for the 2016-2017 period). Journal of Accounting, Finance, Taxation, and Auditing (JAFTA), 1(2), 1–13.
  • Yendrawati, R., & Adiwafi, N. (2021). Comparative analysis of Z-score, Springate, and Zmijewski models in predicting financial distress conditions. Journal of Contemporary Accounting, 2(2), 72–80.
  • Zmijewski, M. (1984). Methodological Issues Related to the Estimation of Financial Distress Prediction Models. Journal of Accounting Research, Supplement Issue, 22, 59-82.

FINANCIAL DISTRESS PREDICTION COMPETENCE OF THE ALTMAN Z SCORE AND ZMIJEWSKI MODEL: EVIDENCE FROM SELECTED ZIMBABWE STOCK EXCHANGE FIRMS

Year 2024, , 9 - 15, 02.06.2024
https://doi.org/10.17261/Pressacademia.2024.1892

Abstract

Purpose- The study aimed to assess the predictive competence of Zmijewski X score and Altman Z score in detecting financial distress in two manufacturing companies that are listed on the Zimbabwe Stock Exchange. The purpose of the study was to ascertain which of the two models is better at foretelling financial distress. The study's conclusions may aid in improving practitioners' and academics' comprehension of the relative benefits of each model and their ability to forecast financial trouble and bankruptcy.
Methodology- The Altman Z score model was employed in the study as a yardstick measure to differentiate between the safe (Z >2.99), grey (1.810) or non-bankrupt (X<0) based on the Zmijewski X score, which was also employed in the research. Two manufacturing businesses registered on the Zimbabwe Stock Exchange made up the sample size for this study, which was carried out between 2010 and 2017. The research was dependent on secondary data gleaned from the two companies' financial statements.
Findings- Manufacturing firm 1's Z-score placed the firm in the distress zone in 2010 and the grey zone in the years 2011 to 2012. From 2010 until 2017, Manufacturing Company 2 experienced financial difficulties. The two manufacturing enterprises under investigation did not exhibit bankruptcy, according to the X-score statistics. According to the study's findings, the Z-score is a better indicator of financial difficulty in emerging nations than the X-score. The Altman Z score and Zmijewski X score models are both useful in predicting financial distress in firms. However, a limitation of these models is that they constitute different financial ratios (Z-score with 5 ratios and X-score 3 ratios) and interpretation. Despite this limitation, these models are still key in unearthing financial distress in firms.
Conclusion- The study concludes that the Altman Z score is superior to the Zmijewski X score in predicting financial distress in developing countries. The Altman Z score model uses 5 financial ratios to predict whether a company has a high probability of becoming insolvent. The Zmijewski X score model uses 3 financial ratios to predict bankruptcy. The study’s findings are important for investors in protecting their investments as the model can help with informed decision making in terms of future prospects of the firm in terms of bankruptcy. There have been cases where an auditor provides an unqualified opinion of the financial statements of an entity only for the entity to be declared bankrupt after the release of the financial statements. Therefore, models such as the Altman Z score can aid in protecting investor loss as the tool can be used to determine bankruptcy, a key signal to divest from the company.

References

  • Altman, E. I. (1968). Financial Ratios, Discriminant Analysis and The Prediction of Corporate Bankruptcy. The Journal of Finance, 23(4), 589-609.
  • Avenhuis, J.O., (2013). Testing the generalizability of the bankruptcy prediction models of Altman, Ohlson and Zmijewski for Dutch Listed and large Non-Listed Firms. Journal of Business Administration, 11, 38-39.
  • Chadha, P. (2016). Exploring the financial performance of the listed companies in Kuwait Stock Exchange using Altman’s Z-score model. International Journal of Economics & Management Sciences, 5(3), 3-18.
  • Edi, E., & Tania, M. (2018). Ketepatan Model Altman, Springate, Zmijewski, dan Grover dalam Memprediksi Financial Distress. Jurnal Reviu Akuntansi dan Keuangan, 8(1), 79-92.
  • Hassan, M.K., & Haque, M.N (2018). Comparative evaluation of Altman’s Z Score, Ohlson’s O score and Zmijewski X score models in predicting corporate bankruptcy in Bangladesh. Asia Journal of Finance & Accounting, 10(2), 67-77.
  • Husein, M. F., & Pambekti, G. T. (2014). Precision of the models of Altman, Springate, Zmijewski, and Grover for predicting the financial distress. Journal of Economics, Business, and Accountancy Ventura, 17(3), 405-416
  • Fatmawati, M. (2012). Penggunaan The Zmijewski Model, The Altman Model dan The Springate Model Sebagai Prediktor Delisting Jurnal Keuangan dan Perbankan, 16(1), 56-65.
  • Fauzan, H., & Sutiono, F. (2017). Perbandingan Model Altman Z-Score. Z-mijewski, Springate, dan Grover Dalam Memprediksi Kebangkrutan Perusahaan Perbankan (Studi Kasus Pada BEI Tahun 2011–2015). Jurnal Online Insan Akuntan, 2(1), 49-60
  • Fauzi, S. E., Sudjono, & Saluy, A. B. (2021). Comparative analysis of financial sustainability using the Altman Z-score, Springate, Zmijewski and Grover models for companies listed at Indonesia Stock Exchange sub-sector telecommunication period 2014–2019. Journal of Economics and Business, 4(1), 23-39.
  • Lutfiyyah, I., & Bhilawa, L. (2021). Analisis Akurasi Model Altman Modifikasi (Z”-Score), Zmijewski, Ohlson, Springate dan Grover Untuk Memprediksi Financial Distress Klub Sepak Bola. Jurnal Akuntansi, 13(1), 46–60.
  • Manufacturing and Mining Sectors Business Tendency Survey: 2nd Quarter 2022 Report. Accessed on 25th April 2023 from: https://www.zimstat.co.zw
  • Melina, M., & Kalinggo, A. G. (2023). The effect of Altman, Grover and Zmijewski Models in predicting the financial distress of coal companies listed on the Indonesia Stock Exchange. International Journal of Social, Policy and Law, 4(1), 69-79.
  • Noor Salim, M & Ismudjoko, D.(2021). An analysis of financial distress accuracy models in Indonesia coal mining industry: An Altman, Springate, Zmijewski, Ohlson and Grover approaches. Journal of Economics, Finance and Accounting Studies, 3(2), 1–12.
  • Ndlovu, R. (2019). Nearly 100 Zimbabwe companies close down. Retrieved April 25, 2023, from https://timelive.co.za/sunday-times/news/2019/-02-17-nearly-100-zimbabwe-companies-close-down.
  • Rovira, E., & Blasco, J.L. (2016). Financial distress prediction models: A study of Spanish firms. Revista Iberoamericana de Contabilidad de Gestion, 14(27), 1-15.
  • Salim, N. M. (2016). Potensi Kebangkrutan Perusahaan Pertambangan Batubara Terdaftar di BEI dengan Pendekatan Model Altman, Springate dan Zmijewski Periode 2011-2014.
  • Salim, N.M., & Sudiono (2017). An analysis of bankruptcy likelihood on coal mining listed firms in The Indonesian Stock Exchange: An Altman, Springate And Zmijewski Approaches. Eurasian Journal of Economics and Finance, 5(3), 99-108.
  • Supitriyani, Astuti, & Azwar, K. (2022). The implementation of Springate, Altman, Grover and Zmijewski Models in measuring financial distress. International Journal of Trends in Accounting Research, 3(1), 1-8.
  • The CZI State of Manufacturing Survey. Accessed on 25th April 2023 from: https://www.czi.ac.zw/the-czi-state-of -manufacturing-survey/
  • Watts, R. L. (2003). Conservatism in Accounting Part I: Explanations and Implications. Accounting Horizons 17, 207–221. Simon School of Business University of Rochester.
  • Wang, H., & Huang, L. (2017). Evaluation of financial distress prediction models in Chinese listed companies. Journal of Applied Accounting Research, 18(2), 178-203.
  • Winarso, E., &; Edison, T. A. (2020). Comparison of modified Altman Z"-score model, Zmijewski X-score model, Grover G-score model, and Springate S-score model to analyze the accuracy of bankruptcy predictions: (Study on Automotive Complementary Industry Sector Manufacturing Companies Listed on IDX for the 2016-2017 period). Journal of Accounting, Finance, Taxation, and Auditing (JAFTA), 1(2), 1–13.
  • Yendrawati, R., & Adiwafi, N. (2021). Comparative analysis of Z-score, Springate, and Zmijewski models in predicting financial distress conditions. Journal of Contemporary Accounting, 2(2), 72–80.
  • Zmijewski, M. (1984). Methodological Issues Related to the Estimation of Financial Distress Prediction Models. Journal of Accounting Research, Supplement Issue, 22, 59-82.
There are 24 citations in total.

Details

Primary Language English
Subjects Finance, Finance and Investment (Other), Business Administration, Business Systems in Context (Other)
Journal Section Articles
Authors

Kudakwashe Mavengere 0000-0002-6259-5690

Phathisani Gumede This is me 0000-0001-7804-8678

Publication Date June 2, 2024
Submission Date February 22, 2024
Acceptance Date April 30, 2024
Published in Issue Year 2024

Cite

APA Mavengere, K., & Gumede, P. (2024). FINANCIAL DISTRESS PREDICTION COMPETENCE OF THE ALTMAN Z SCORE AND ZMIJEWSKI MODEL: EVIDENCE FROM SELECTED ZIMBABWE STOCK EXCHANGE FIRMS. Journal of Economics Finance and Accounting, 11(1), 9-15. https://doi.org/10.17261/Pressacademia.2024.1892

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