Predicting Bankruptcy: Evidence from Israel

Shilo Lifschutz

Abstract


In this study, we conducted an empirical investigation of whether it is possible to rely on two versions of the Altman Model (1968) to predict financial failure of publicly traded companies in Israel between 2000 and 2007. The findings of the study indicated that given the sample and the study term, the preferable model for predicting financial failure of Israeli companies is the Ingbar version of the Altman Model with a critical value of 1 and with the addition of the gray area. In particular, a survival index above 1 predicts a high likelihood of survival, while a lower index predicts low likelihood of survival. According to our study, the model is able to predict bankruptcy of companies with a 95% accuracy rate one year prior to bankruptcy and with an 85% accuracy rate two years prior to bankruptcy.


Full Text: PDF

Creative Commons License
This work is licensed under a Creative Commons Attribution 3.0 License.

International Journal of Business and Management   ISSN 1833-3850 (Print)   ISSN 1833-8119 (Online)

Copyright © Canadian Center of Science and Education

To make sure that you can receive messages from us, please add the 'ccsenet.org' domain to your e-mail 'safe list'. If you do not receive e-mail in your 'inbox', check your 'bulk mail' or 'junk mail' folders.