The Altman ‘Z’ is “50” and Still Young: Bankruptcy Prediction and Stock Market Reaction due to Sudden Exogenous Shock

Poudel, Rajeeb; Prasad, Dev; Jain, Ravi

Journal of

Marketing Development and Competitiveness

Scholar Gateway

Abstracts prior to volume 5(1) have been archived!

Issue 5(1), October 2010 -- Paper Abstracts

Girard (p. 9-22)

Cooper (p. 23-32)

Kunz-Osborne (p. 33-41)

Coulmas-Law (p.42-46)

Stasio (p. 47-56)

Albert-Valette-Florence (p.57-63)

Zhang-Rauch (p. 64-70)

Alam-Yasin (p. 71-78)

Mattare-Monahan-Shah (p. 79-94)

Nonis-Hudson-Hunt (p. 95-106)

JOURNAL OF ACCOUNTING AND FINANCE

The Altman ‘Z’ is “50” and Still Young:

Bankruptcy Prediction and Stock Market Reaction due to Sudden Exogenous Shock

Author(s): Rajeeb Poudel, Dev Prasad, Ravi Jain

Citation: Rajeeb Poudel, Dev Prasad, Ravi Jain, (2020) "The Altman ‘Z’ is “50” and Still Young: Bankruptcy Prediction and Stock Market Reaction due to Sudden Exogenous Shock," Journal of Accounting and Finance, Vol. 20, ss. 2, pp. 65-73

Article Type: Research paper

Publisher: North American Business Press

Abstract:

This study is motivated by the continuing popularity of the Altman Z-score as a measure of distress risk. This study provides a hitherto unexplored perspective by examining the relation between stock market returns and the probability of bankruptcy during an unexpected sudden shock. Following the 9/11 attacks of 2001, the US stock market dropped dramatically. We find evidence that firms which had higher bankruptcy risk experienced greater negative returns following the attack. This study suggests that the Altman Z-score is useful in identifying firms with a higher distress risk and consequent larger negative stock returns in the event of an exogenous sudden shock.