Portability of Multiple Discriminant Analysis Prediction Model of Listed Firms: An Emerging Market Perspective
Portability of Multiple Discriminant Analysis Prediction Model of Listed Firms: An Emerging Market Perspective
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Date
2018
Authors
Gyimah, Prince
Boachie, W K
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Publisher
Research Journal of Finance and Accounting
Abstract
This paper tests the portability of Altman’s (2000) Z-score model in predicting corporate failure of listed firms in
an emerging market, Ghana. The study applies the model on financial statements of fifteen (15) firms listed on
Ghana Stock Exchange (GSE) for 2013 fiscal year. The empirical result shows that 66.7 percent of the listed firms
were misclassified as failed firms (Type II Error) and correctly classified 33.3 percent as success firms or safe zone
firms. The study concludes that the Altman (2000) financial model is not portable in Ghana due to high type II
error rate and this is calling more research for the use of non-financial models in predicting corporate failure in
emerging markets.
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Citation
Gyimah, P., & Boachie, W. K. (2018). Portability of multiple discriminant analysis prediction model of listed firms: an emerging market perspective. Research Journal of Accounting and Finance, 9(6), 94-99.