Abstract

The Altman Z-score (1968) model and the Altman Z’’-Score model (1993) have been created and applied in the
US and other developed countries in a specific era. It is therefore possible that their results are not generalisable
to less developed countries in today’s context. We tested the generalisability of these two statistical failure
prediction models in the Jordanian environment. We used a sample of 71 failed and 71 non-failed companies
that were chosen based on the same industry, year of data, and a comparable size of total assets. We tested if the
two models predict failures as they did in the US and European countries and if these models are thus relevant
for Jordanian firms. We found that the original Altman Z-Score (1968) model still works effectively. The model
is generalisable in the Jordanian context for assessing failed industrial companies. For service companies,
however, we found that the Altman models could not provide strong indicators to differentiate between failed
and non-failed companies.

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