AN ASSESSMENT OF THE APPLICATION AND THE CORPORATE FAILURE PREDICTIVE VALUE OF ALTMAN’S ZSCORE MODEL IN ZIMBABWE

Abstract

This research focuses on testing corporate failure predictive
value of Altman’s Z-score model on Zimbabwe’s financial
institutions in order to establish whether the model can
accurately predict risk of failure for these financial institutions
and the extent to which the model is being employed by the
institutions for failure prediction particularly after Zimbabwe
faced unique economic conditions. A case study approach with
ten selected financial institutions was used. The research found
out that the Z-Score model can accurately predict risk of failure
within two years with higher accuracy one year prior to failure
and that financial institutions were not employing the model in
failure prediction. The study concluded that the Z-score model is
an effective tool for failure management and was therefore
recommended.