Application of Z"-score model to non-financial sector of Pakistan Online publication date: Wed, 17-Oct-2018
by Muhammad Tahir; Sidra Hanif
International Journal of Business and Emerging Markets (IJBEM), Vol. 10, No. 4, 2018
Abstract: The article applies Z"-score model to predict the financial distress-level of 131 firms of five industries from non-financial sector of Pakistan, including automobile, food, chemical, engineering and cement industry. First, Z"-score was calculated for all the firms within the five industries. Afterwards, the skewed nature of the dataset leads to the application of Kruskal-Wallis test to reach through the conclusion. The results rank the financial health of the automobile industry at first place in contrast to that of the cement industry at last place. Hence, the cement industry has weaker financial health among all others in the sample. Thus, the study recommends to employ Z"-score model to be aware of financial health of the firms, so that some immediate measures could be adopted to avoid severe future consequences. Moreover, the results of the study are useful for the stakeholders of the firms. For example, investors can use this information to assess the financial health of the firms before investing their money.
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