Authors: Farirepi Mugozhi and Anyway Ngirazi
This research focuses on testing corporate failure predictive value of Altman’s Z-score model on Zimbabwe’s financial institutions in order 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. 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.
Keywords: Failure prediction; financial institutions; Z score model; Risk of failure