Fiancial Failure Prediction: An Empirical Study on Ethiopian Public Enterprises
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Date
2003-02
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A.A.U
Abstract
The main purpose of this research is to throw light on a very challenging and perhaps forgotten
issue of predicting corporate failure in Ethiopian public enterprises. The study tests and
replicates a quantitative model for classifying and predicting serious financial problems of
companies. It utilized a failure classification model developed by Altman in 1968 and updated
continuously. A sample of 15 serious-problem enterprises is compared with the same number of
healthy enterprises. Altman Z-Score Model successfully classified 80 percent of the enterprises
one year prior to serious financial problems and as much as 70 percent two years prior. A
comparable model replicated for the Ethiopian context, with a revised cut-off point, correctly
classified 83 percent of the enterprises one year prior to serious financial problems and as much
as 80 percent two years prior. In summary, the outcome of the research is expected to draw
pointed attention to managers, government, lending institutions, suppliers, employees, and the
community at large in assessing the financial health of an enterprise.
III
Description
A Research Paper Prepared in Partial Fulfillment of the Requirements for Masters Degree in
Business Administration [MBA]
Keywords
An Empirical Study on Ethiopian Public Enterprises