Title: Application of Z"-score model to non-financial sector of Pakistan

Authors: Muhammad Tahir; Sidra Hanif

Addresses: School of Accounting, RMIT University, Melbourne, Australia ' Hailey College of Commerce, University of the Punjab, Lahore, Pakistan

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.

Keywords: financial health; Altman Z-score; emerging market score; EMS; financial leverage; liquidity; distress-level; Pakistan.

DOI: 10.1504/IJBEM.2018.095709

International Journal of Business and Emerging Markets, 2018 Vol.10 No.4, pp.380 - 395

Received: 08 May 2018
Accepted: 23 Jun 2018

Published online: 17 Oct 2018 *

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