n Journal of Contemporary Management - The ability of the Altman Z-score to predict the relative success of industrial companies listed on the Johannesburg Stock Exchange




Business failure prediction models, such as the Altman Z-score, are promoted as tools to assist with business turnaround and managerial decisions. While much research has been performed on such models ability to predict business failure, there is limited research relating to these models ability to predict future success and improved performance.

The aim of this study was to investigate whether the Altman Z-score was capable of predicting the relative level of financial success one year after the financial results on which the Z-score was based. Ordinary least squares regression is used to draw insights from a sample of 13 companies listed under the Industrial sector (J257) on the Johannesburg Stock Exchange.
Findings from the analysis reveal inconclusive results on the Z-scores ability to accurately predict financial success. Drawing from the findings, managers in the Industrial sector in South Africa who are seeking to improve the performance of their companies, as well as investors and portfolio managers, should use caution when interpreting the results obtained from the Altman Z-score.


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