Abstract
Purpose: The purpose of this paper is to use relevant financial information of private medium-sized failed and non-failed manufacturing firms in the UK, during the period 1994-2004 to determine whether corporate failure can be predicted by developing a Z-score model. Design/methodology/approach: Multiple discriminant analysis is used to develop the Z-score to support the notion that Z-score is an innovation to overcome the numerous difficulties associated with using single ratios to measure companies' health or risk of failure. Findings: This paper advances the notion that the net profit margin is superior to the gross profit margin in discriminating between failed and non-failed UK manufacturing companies in terms of its significant contribution to the Z-score, though the latter exceeds the former slightly using the univariate analysis. Originality/value: This research contributes to the area of benchmarking by providing a method to more accurately predict corporate failure.
Original language | English |
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Pages (from-to) | 432-444 |
Number of pages | 13 |
Journal | Benchmarking |
Volume | 16 |
Issue number | 3 |
DOIs | |
Publication status | Published - 29 May 2009 |
Externally published | Yes |
Keywords
- Bankruptcy
- Business failures
- United Kingdom