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The Use of the Altman Model in Evaluation of Economic Performance of a Corporation in the Crisis Period in the Building Sector in the Czech Republic

Author

Listed:
  • Marcela Basovníková

    (Department of Business Economics, Faculty of Business and Economics, Mendel University in Brno, Zemědělská 1, 613 00 Brno, Czech Republic)

  • Miloš Konečný

    (Department of Business Economics, Faculty of Business and Economics, Mendel University in Brno, Zemědělská 1, 613 00 Brno, Czech Republic)

  • Roman Dubový

    (Department of Business Economics, Faculty of Business and Economics, Mendel University in Brno, Zemědělská 1, 613 00 Brno, Czech Republic)

  • Andrea Masařová

    (Department of Business Economics, Faculty of Business and Economics, Mendel University in Brno, Zemědělská 1, 613 00 Brno, Czech Republic)

Abstract

The article is focused on verification of the presumption of poor financial management in companies operating in the building sector. Many authors have written about a financial situation of enterprises in the building sector, especially after the economic crisis in the year 2008, when some of them claim and their results confirm that the main reason of bankruptcy of these companies was not the economic crisis but mainly poor financial management. Our results, which were obtained especially by the method of financial analysis and further by a mathematical and statistical method, support this statement. Within the mathematical and statistical methods, there was return on equity used as an explanatory variable, mainly because all variants of the Altman Z-Score are based on the calculation of ratio indicators, which do not include this type of return. Based on the conducted tests it is possible to state that it is highly desirable for the monitored enterprises in the building industry to reach positive values of return on equity.

Suggested Citation

  • Marcela Basovníková & Miloš Konečný & Roman Dubový & Andrea Masařová, 2018. "The Use of the Altman Model in Evaluation of Economic Performance of a Corporation in the Crisis Period in the Building Sector in the Czech Republic," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 66(2), pages 409-421.
    • Handle: RePEc:mup:actaun:actaun_2018066020409
    DOI: 10.11118/actaun201866020409
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    References listed on IDEAS

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    1. Inka Neumaierová & Ivan Neumaier, 2014. "INFA Performance Indicator Diagnostic System," Central European Business Review, Prague University of Economics and Business, vol. 2014(1), pages 35-41.
    2. Edward I. Altman, 1968. "The Prediction Of Corporate Bankruptcy: A Discriminant Analysis," Journal of Finance, American Finance Association, vol. 23(1), pages 193-194, March.
    3. Altman, Edward I., 2005. "An emerging market credit scoring system for corporate bonds," Emerging Markets Review, Elsevier, vol. 6(4), pages 311-323, December.
    4. Erkens, David H. & Hung, Mingyi & Matos, Pedro, 2012. "Corporate governance in the 2007–2008 financial crisis: Evidence from financial institutions worldwide," Journal of Corporate Finance, Elsevier, vol. 18(2), pages 389-411.
    5. Edward I. Altman, 1968. "Financial Ratios, Discriminant Analysis And The Prediction Of Corporate Bankruptcy," Journal of Finance, American Finance Association, vol. 23(4), pages 589-609, September.
    6. Altman, Edward I. & Rijken, Herbert A., 2004. "How rating agencies achieve rating stability," Journal of Banking & Finance, Elsevier, vol. 28(11), pages 2679-2714, November.
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