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JOURNAL OF ACCOUNTING AND FINANCE
Application of the Z -Score Model with Consideration of Total Assets
Volatility in Predicting Corporate Financial Failures from 2000-2010
Author(s): June Li, Reza Rahgozar
Citation: June Li, Reza Rahgozar, (2012) "Application of the Z -Score Model with Consideration of Total Assets Volatility in Predicting Corporate Financial Failures from 2000-2010," Vol. 12, Iss. 2, pp. 11 - 19
Article Type: Research paper
Publisher: North American Business Press
Abstract:
This study re-examines the accuracy of the original Z-score model in predicting corporate failures in the U.S. from 2000-2010. It also explores whether asset volatility substantiates the Z-score in predicting bankruptcies. The results show that the original Z-score model is valuable in predicting corporate financial stress for both manufacturing and non-manufacturing firms. It also finds total asset volatility might be a missing variable from the original model when predicting financial distress of manufacturing firms. Other results imply that stakeholders would further benefit from observing a company’s financial status for a period longer than one or two years.
