Business failure Prediction Models: A Review and Analysis of Literature of Listed Firms in Ghana

Abstract

This paper examines the phenomenon of corporate insolvency from a developing economy perspective using data from Ghana to test the applicability of the Altman Z-score model. Drawing sample data from 16 non-distress and distressed companies listed on the Ghana Stock Exchange is tested for the Z-score to predict possible failure or insolvency. The study replicates Appiah's (2011) model to investigate different companies' results with datasets within the 2018 and 2019 financial years. The sample data revealed that 18.75% were financially distressed, 37.50% were in the grey zone making their survival uncertain, and 43.75% were safe for investment. This study contributes significantly to the literature on business failure prediction from an increasingly globalized perspective while seeking to assist investors to be cautious in the cause of making investment decisions

Keywords:Business failure, Corporate Governance, Financial Distress, Z-Score

DOI: 10.7176/RJFA/13-20-05

Publication date:October 31^st 2022