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Financial Distress Prediction through Altman Z-Score Model: A Case Study of State Owned Commercial Banks of Bangladesh

Author

Listed:
  • Subrata Deb Nath

    (Department of Foreign Remittance, Local office, Janata Bank Limited, Dilkusha C/A, Dhaka-1000, Bangladesh.)

  • Prasenjit Kumer Biswas

    (AB Bank Limited, Sreemangal Branch, Moulavibazar, Sylhet, Bangladesh.)

  • Md. Aminur Rashid

    (Department of Treasury, JBL, Head Office, 110 Motijheel C/A, Dhaka-1000, Bangladesh.)

  • Munna Rani Biswas

    (Cabinet Division, Bangladesh Secretariat, People’s Republic of Bangladesh.)

Abstract

Purpose: Banks are the backbone of the economy. The bank collects money temporarily from the public and lends to other people as per need. Banks should concern about the soundness of their financial health. The purpose of this study is to predict the financial health of the State Owned Commercial Banks (SOCBs) of Bangladesh using Altman Z-score Model. Methodology: The Z-score uses working capital to total assets, retained earnings to total assets, earnings before interest and tax to total assets, shareholders equity to total liabilities to measure the financial health of the banks. The study is analytical in nature and is carried out based on only secondary data. The published Annual Reports of the six SOCBs for the period of 2010-2018 collected for secondary data and financially analyzed through Altman Z-score Model for prediction of financial distress. Findings: The study found that with only one exception, the financial health of the SOCBs is unsatisfactory. One exception is only Bangladesh Development Bank which fell into grey zone among the six SOCBs as it secured on an average 1.52 score. However, the remaining others are found in Distress zone as they secured on an average

Suggested Citation

  • Subrata Deb Nath & Prasenjit Kumer Biswas & Md. Aminur Rashid & Munna Rani Biswas, 2020. "Financial Distress Prediction through Altman Z-Score Model: A Case Study of State Owned Commercial Banks of Bangladesh," Indian Journal of Commerce and Management Studies, Educational Research Multimedia & Publications,India, vol. 11(3), pages 60-67, September.
    • Handle: RePEc:aii:ijcmss:v:11:y:2020:i:3:p:60-67
    DOI: 10.18843/ijcms/v11i3/06
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    References listed on IDEAS

    as
    1. Muammar Khaddafi & Falahuddin & Mohd. Heikal & Ayu Nandari, 2017. "Analysis Z-score to Predict Bankruptcy in Banks Listed in Indonesia Stock Exchange," International Journal of Economics and Financial Issues, Econjournals, vol. 7(3), pages 326-330.
    2. Sufian Al-Manaseer & Suleiman Al-Oshaibat, 2018. "Validity of Altman Z-Score Model to Predict Financial Failure: Evidence From Jordan," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 10(8), pages 181-181, August.
    3. Md. Qamruzzaman, 2014. "Predicting Bankruptcy: Evidence from Private Commercial Banks in Bangladesh," International Journal of Financial Economics, Research Academy of Social Sciences, vol. 2(3), pages 114-121.
    Full references (including those not matched with items on IDEAS)

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