Prediction of corporate financial distress in glass and glassware sector of India

Sarbapriya Ray

International Journal of Business Excellence, 2011, vol. 4, issue 6, 678-695

Abstract: Empirical researchers and practitioners frequently use bankruptcy prediction model developed by Altman (1968) which poses a potential problem for practitioners and researchers working with Indian data as Altman model was developed using US data. This paper attempts to analyse the financial health of glass and glassware sector in India and test whether Altman's Z score model can predict correctly the of the glass sector in Indian context for the study period, 2000-2001 to 2006-2007. Our result shows that Altman's model performs well in predicting failure. The Z score from the analysis shows that it is less than 1.81 in all the years implying that this sector has increased its debts and will be facing bankruptcy in the near future unless regulatory measures are taken to tackle the adverse situation. The study shows that individual ratio within the multiple discriminate framework has depicted dismal gloomy picture signifying inefficiencies within the firms that may endanger financial health of Indian glass companies and consequently, most of the glass producing companies in India has been caught in a vicious down cycle facing a threat to their viability and survival.

Keywords: corporate distress; Altman; bankruptcy; glass industry; India; glassware; financial distress; corporate failure; bankruptcy prediction. (search for similar items in EconPapers)
Date: 2011
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