Could the Altman Z-score model detect the financial distress in Ghana? Multivariate discriminant analysis
Open Access
- 24 June 2020
- journal article
- Published by Virtus Interpress in Corporate Governance and Sustainability Review
- Vol. 4 (2), 8-19
- https://doi.org/10.22495/cgsrv4i2p1
Abstract
The purpose of this paper is to assess the effectiveness of the Altman Z-score model to discriminate between financially distressed and non financially distressed manufacturing firms listed on the Ghana Stock Exchange. Eleven firms consisting of two financially distressed and nine non-financially distressed manufacturing firms were analysed. Independent descriptive statistics, independent sample t-test, and multivariate discriminant analysis were the analytical tools used to analyse the hypotheses of this study. The study revealed that working capital/total assets and sales/total assets were the major discriminators of financially distressed firms on the Ghana Stock Exchange. Multivariate discriminant analysis revealed an accuracy rate of 79.9% to detect financially distressed firms in Ghana.Keywords
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