PREDICTING FINANCIAL DISTRESS FOR MOBILE TELECOMMUNICATION COMPANIES LISTED IN KUWAIT STOCK EXCHANGE USING ALTMAN’S MODEL

Year 2018, Volume: 5 Issue: 3, 242 - 248, 30.09.2018

Musaed S. Alali

Abstract

Purpose- With the
bankruptcy of many large companies in recent years especially after the global
financial crisis in 2008, the attention to bankruptcy prediction models has
increased dramatically. The aim of this study is to examine the financial
soundness of the companies listed in the mobile telecommunication sector in the
Kuwait stock exchange (KSE).

Methodology- Many bankruptcy
models were developed as an early warning systems for any distress a company
might face. This paper uses one of the most common models, Altman Z-score
model, to examine the likelihood of bankruptcy and the financial soundness of
mobile telecommunication companies listed in Kuwait stock exchange market
during the period from 2013 to 2016.

Findings- The results
showed that out of the three companies operating in Kuwait, only one of them had
a healthy financial position while the other two companies are facing financial
distress.

Conclusion-
The study found that
mobile telecommunication companies in Kuwait are facing the risk of bankruptcy
due to their negative working capital which makes them vulnerable to any
unexpected short-term obligations. As a result, these companies should work to
reduce the gap between their current assets and current liabilities.

Keywords

Altman, Z-score, mobile telecommunication sector, Kuwait stock exchange, financial distress, bankruptcy

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