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Applying Emerging Market Z-Score Model to Predict Bankruptcy: A Case Study of Listed Companies in the Stock Exchange of Thailand (Set)

Sasivimol Meeampol, Polwat Lerskullawat, Ausa Wongsorntham, Phanthipa Srinammuang, Vimol Rodpetch and Rungsimaporn Noonoi
Additional contact information
Sasivimol Meeampol: Faculty of Business Administration, Kasetsart University, Thailand
Polwat Lerskullawat: Faculty of Business Administration, Kasetsart University, Thailand
Ausa Wongsorntham: Faculty of Business Administration, Kasetsart University, Thailand
Phanthipa Srinammuang: Faculty of Business Administration, Kasetsart University, Thailand
Vimol Rodpetch: Faculty of Business Administration, Kasetsart University, Thailand
Rungsimaporn Noonoi: Faculty of Business Administration, Kasetsart University, Thailand

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Abstract: Business bankruptcy for a certain company is an absolute affirmation of its inability to endure current operations given its current debt obligations. If the bankruptcy was expected ahead of time, investors of the companies have the ability to secure their companies and could take action to reduce risk and loss of business and perhaps avoid bankruptcy itself. This research aims to examine the financial distress of the listed companies on the Stock Exchange of Thailand (SET). It will examine the percentage that this model fit to the data of companies listed on the Stock Exchange of Thailand (SET), which applies the Z-score model and the emerging Market Score (EM Z-Score model) created by Edward L. Altman. This study used the companies listed on the SET in 2012, which these firms must contain the NC (Non-Compliance) sign. Having organized the data, we have the final sample of 31 firms to be examined. The SETSMART (SET database: SET Market Analysis and Reporting Tools) was used to obtain the financial information from the year 2010 and 2011, then the Z-score model and the Altman’s (1995) EM-Score model as our main methodologies. Results of analysis highlights that the use of Emerging Market Z- score model and the Z-score model had clearly shown that, they can completely predict the sign of a possible bankruptcy that may occur. Furthermore, they are effective when two years of information were used than one year. Meanwhile, the Z - score model fits better when applied to the Thailand Stock Market even when Thailand is an emerging economy, it should fit more with the Emerging Market Z-Score model.

Keywords: bankruptcy; Altman’s Z-Score model; EM-Score Model; the Emerging Market and SET Thailand (search for similar items in EconPapers)
Date: 2014
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