Abbas, Qaiser and Rashid, Abdul (2011): Modeling Bankruptcy Prediction for Non-Financial Firms: The Case of Pakistan.
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This paper aims to identify the financial ratios that are most significant in bankruptcy prediction for the non-financial sector of Pakistan based on a sample of companies which became bankrupt over the 1996-2006 period. Twenty four financial ratios covering four important financial attributes namely profitability, liquidity, leverage, and turnover ratios) were examined for a five-year period prior bankruptcy. The discriminant analysis produced a parsimonious model of three variables viz. sales to total assets, EBIT to current liabilities, and cash flow ratio. Our estimates provide evidence that the firms having Z value below zero fall into the “bankrupt” whereas the firms with Z value above zero fall into the “non-bankrupt” category. The model achieved 76.9% prediction accuracy when it is applied to forecast bankruptcies on the underlying sample.
|Item Type:||MPRA Paper|
|Original Title:||Modeling Bankruptcy Prediction for Non-Financial Firms: The Case of Pakistan|
|English Title:||Modeling Bankruptcy Prediction for Non-Financial Firms: The Case of Pakistan|
|Keywords:||Bankruptcy; Z-Score; Non-Financial Firms; Financial Ratios; Pakistan|
|Subjects:||G - Financial Economics > G3 - Corporate Finance and Governance > G33 - Bankruptcy ; Liquidation|
|Depositing User:||Dr Abdul Rashid|
|Date Deposited:||18. Jan 2011 20:14|
|Last Modified:||11. Feb 2013 18:22|
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