Application of Altman Bankruptcy prediction model in Ghana

The study examined the applicability of the Altman Z-score model in predicting bankrupt companies or financially distressed companies on the Ghana Stock Exchange. A sample 10 listed firms were selected and one other company to be used for validation purposes. The validation process involved data for 2016 and 2017 for Aluworks which represented a distressed company and GOIL Ghana Limited which represented non-distressed company. The final analysis was based on a random sample of 10 listed firms using their 2017 financial statement. The results of the initial prediction showed 50 percent of the companies were correctly predicted whiles the others were misclassified. Additional analyses showed that the size of the company influence the probability of bankruptcy whiles the nature of the business does not. The conclusion drawn shows that the Altman Z-score cannot accurately predict financially distressed firms in Ghana but can still be useful in giving signals.