Testing the Predictive Power of Altman’s Revised Z’ Model: The Case of 10 Multinational Companies

Abstract

The study aimed to investigate and test the predictive power of the Altman’s revised Z’ model in the case of multinational companies, and took a sample of 10 multinational companies for two years; 5 bankrupt companies, and 5 companies continue to work as of 2014.

The descriptive quantitative methodology has been followed in the study, and the data was obtained from the financial reports of the companies in the sample.

The study concludes that Edward Altman’s Z’ model for financial distress prediction is an accurate for the failed multinational companies at a predictive power of 70%, and for the non-failed at a predictive power of 55%.

Keywords: Altman’s Model, financial failure, Multinational Companies