The Evaluate ability of Altman adjusted Model to Prediction Stages of Financial Distress Newton and Bankruptcy

Subject Areas : Journal of Investment Knowledge

Gholamreza Kordestani ¹ , Rashid Tatli ² , Hamid Kosari Far ³

1 - Associate professor of Accounting, Imam Khomeini International University, Qazvin, Iran
2 - Master of Accounting, Islamic Azad University of Qazvin, Iran (Corresponding Author)
3 - Master of Accounting, Islamic Azad University of Qazvin, Iran

Received: 2013-08-08 Accepted : 2014-01-10 Published : 2014-01-10

Keywords: Stages of financial distress, Bankruptcy, Altman Adjusted Model, Altman,

Abstract :

The recent bankruptcies in national and international level, makes necessary models to increase accuracy of firms 'financial ability prediction. One of the simplest and the most famous financial distress prediction models is the Altman model. This model is designed in other economic environment and using unadjusted form in the Iran capital market could be Create error. Therefore, this study investigates initially Altman models accuracy without adjustment coefficients, and then adjusts the coefficients of the model proportional financial and economic environment of Iran and design simple model, to facilitate decision making for users of financial information. For this purpose, Information 112 firms listed on the Tehran Stock Exchange, including 56 distressed and 56 healthy firms, for a period of 17 years (1374-1390) were studied. Finding show that Altman unadjusted model identify, more than 50% of distressed firms in the years before the bankruptcy, and 18 percent of healthy firms introduced bankrupt. While that the Altman adjusted model, identify bankruptcy firms by accuracy 95%, and the total stages of financial distress in one, two and three years before bankruptcy, respectively, with an accuracy of 63%, 91% and 96% prediction.