Manufacturing Company Bankruptcy Prediction in Indonesia With Altman Z-Score Model

Abstract

Abstract:Model Altman is one of the models used to predict financial distress. Some of the results of research that conducted in Indonesia showed that Altman model is completely accurate in predicting financial distress but the other found the opposite results. This inconsistency indicates the need to adapt the model by checking whether variables affect Altman model in financial distress companies in Indonesia and the adjustment coefficients Altman to be able to better predict about financial distress. The results showed that the partial test working capital/total assets, retained earnings to total assets, and earning before interest and tax to total assets were able to classify the company's financial distress. However, the model that formed by five variables were able to classify financial distress well with an accuracy of 87.8%.

FDPM after the global price crisis in the coal industry

“…Lee et al (2014) findings are supported by Lundholm (1995). Dolejšová (2015) and Matturungan et al (2017) confirmed that the Altman and Springate models had 80% accuracy for predicting a company's financial status. This result was also supported by Syamni et al (2018).…”

“…Aaron et al (2017), Husein and Pambekti (2015) stated that it is possible to predict potential bankruptcy using three methods, the Altman Z-score, the Springate model and the Zmijewski model. Matturungan et al (2017) mentioned that the Altman method is the most appropriate bankruptcy predictor for food and beverage companies listed on the IDX. This result is supported by Husein and Pambekti (2015), Karaca and Ercan (2017), Nandhini et al (2012), Oz and Simga-Mugan (2018), Sinarti and Sembiring (2015) and Zhou et al (2015).…”

Determinant of Downward Auditor Switching

“…. Altman Z-score has the power to predict one year ahead bankruptcy of manufacturing companies as much as 87.8 percent (includes in good category) in Indonesia (Matturungan, Purwanto, & Irwanto, 2017), 86 percent (includes in great fit category) in Malaysia (Odibi, Basit, & Hassan, 2015), 86.1 percent in Thailand (Meeampol et al, 2014). Altman Z score is used to predict performance of manufacturing companies in Singapore as weIl (Foo, 2015).…”

Financial Distress Prediction in Subfrastructure, Utility and Transportation Sub Sector Service in Indonesia

“…Lakshan & Wijekoon (2013) examined using 70 bankrupt companies and 70 nonbankrupt companies listed on the Colombo capital market in the period [2002][2003][2004][2005][2006][2007][2008] showing working capital to total assets affected the financial distress of companies both bankrupt and not. Research conducted by Darmawan & Supriyanto (2018), Delavar et al (2015), Caballero et al (2014), and Matturungan et al (2017) also show the results that working capital to total assets affects the company's financial distress.…”