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Adaptation of the Altman’s Corporate Insolvency Prediction Model – The Bulgarian Case

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  • Ekaterina Tzvetanova

Abstract

Having an adapted model for prediction of Bulgarian corporate insolvency is a useful tool for a wide range of financial statement users. In the past sixty years, plenty of papers was published in this field. However, a statistically significant insolvency prediction model hasn't been constructed based on Bulgarian financial ratios. The purpose of the study was to solve this task. Linear Discriminant Analysis was used to select variables and to quantify the coefficients of the insolvency financial indicators for Bulgarian companies. The classification tests were applied to initial and test samples. Analysis of the classification accuracy was made comparing the adapted model and the revised Altman’s Z-score model in 2000. The result confirmed the need for adaptation of Altman’s Z-score model.

Suggested Citation

  • Ekaterina Tzvetanova, 2019. "Adaptation of the Altman’s Corporate Insolvency Prediction Model – The Bulgarian Case," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 4, pages 125-142.
    • Handle: RePEc:bas:econst:y:2019:i:4:p:125-142
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    More about this item

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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