Bankruptcy Risk Prediction Using Altman’s Z-Score Model: An Empirical Study on Private Commercial Banks of Bangladesh

Abstract

Now a days the financial stability is a current concern for central bank and practitioners of our country. The economy and the banking sector stability of Bangladesh is utmost regarding issue. Especially in our country there are numerous number of banks are established. Now what is “bankruptcy”, it is a legal proceeding involving a person or business that is unable to repay outstanding debts. There are various model to predict the bankruptcy risk though here in this study has been used Altman Z-score (1995) revised model. In this research 21 banks are considered as sample where all are listed in Dhaka stock exchange (DSE). Basically from the findings of the study it is quite interesting that the non-conventional banks are in better position in on an average overall z- score performance during the time period of 2009 to 2016 and the findings suggest to take private commercial banks under strict supervision of the central bank of Bangladesh. This research study is focusing on z-score performance and predicting future financial distress position of banking sector and defining the riskiness of being bankrupt by proving it through hypothesis testing and marking the acceptance of Altman Z-score model.