Prediction of financial failure of Saudi listed companies

Abdullatif Mohamed. A Basheikh

International Journal of Managerial and Financial Accounting, 2012, vol. 4, issue 2, 195-213

Abstract: This study aims to test a range of financial ratios by using the discriminant and logistic regression models, to determine the accuracy of these models and their ability to predict the failure of Saudi listed companies. The comparison between the two models acts to determine which model is more appropriate for predicting failure of listed companies. Also the study facilitates determining which, financial ratios predict the financial failure of listed companies. The study is based upon data and information extracted from published annual reports of companies for the period 2005 to 2009. The main findings of the research are: 1) both discriminant and logistic regression models can predict the financial failure of Saudi listed companies before its occurrence.; 2) the return on equity and profit before Zakat and tax/total assets are considered as the two most important financial ratios, which help to predict the failure of Saudi listed companies.

Keywords: Saudi Arabia; listed companies; discriminant analysis; logistic regression; financial ratios; failure prediction; financial failure; modelling. (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:ids:injmfa:v:4:y:2012:i:2:p:195-213

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