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The Z-Score Model for Predicting Periods of Financial Instability. Z-Score Estimation for the Banks Listed on Bucharest Stock Exchange

Author

Listed:
  • Irina – Raluca Badea

    (University of Craiova Faculty of Economics and Business Administration)

  • Gheorghe Matei

    (University of Craiova Faculty of Economics and Business Administration)

Abstract

Financial stability is an ongoing concern for practitioners, policy makers, but also for banks, especially in terms of quantifying it. Therefore, this paper consists of a theoretical approach in conjunction with an applicative study based on an alternative measure of financial stability, namely the Z-score model proposed by Altman. The Z-score model, although originally designed for manufacturing companies, has been repeatedly adjusted, depending on the activity of the company which applies the model and the development of the operating market. Thus, from a sample of banks listed on the Bucharest Stock Exchange, we determined the Z-score function for the period 2012-2014, outlining the evolution of their financial stability according to the classification results.

Suggested Citation

  • Irina – Raluca Badea & Gheorghe Matei, 2016. "The Z-Score Model for Predicting Periods of Financial Instability. Z-Score Estimation for the Banks Listed on Bucharest Stock Exchange," Finante - provocarile viitorului (Finance - Challenges of the Future), University of Craiova, Faculty of Economics and Business Administration, vol. 1(18), pages 24-35, November.
    • Handle: RePEc:aio:fpvfcf:v:1:y:2016:i:18:p:24-35
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    References listed on IDEAS

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    1. Bouvatier, Vincent & Lepetit, Laetitia & Strobel, Frank, 2014. "Bank income smoothing, ownership concentration and the regulatory environment," Journal of Banking & Finance, Elsevier, vol. 41(C), pages 253-270.
    2. Martin Čihák & Heiko Hesse, 2010. "Islamic Banks and Financial Stability: An Empirical Analysis," Journal of Financial Services Research, Springer;Western Finance Association, vol. 38(2), pages 95-113, December.
    3. Ravi Balakrishnan & Stephan Danninger & Selim Elekdag & Irina Tytell, 2011. "The Transmission of Financial Stress from Advanced to Emerging Economies," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 47(0), pages 40-68, May.
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    Cited by:

    1. Kawsar Jahan & Mohammod Akbar Kabir & Farjana Nur Saima & Md. Nasim Adnan, 2019. "Financial Crises in State Owned and Private Commercial Banks in Bangladesh: A Comparative Analysis," Business and Economic Research, Macrothink Institute, vol. 9(2), pages 146-159, June.

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    More about this item

    Keywords

    financial stability; bankruptcy risk; Z-score model; ROA; Bucharest Stock Exchange;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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