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Financial distress arises from excessive debt capital. The aim of the study was to determine Altman’s Z score and show a comparative analysis of the effect of debt on Z scores of listed MNCs & domestic firms of Bangladesh over a 24-year period (1996-2019). The study was based on secondary data. Seven domestic firms and seven MNCs were selected as sample from six manufacturing industrial sectors. It was found that on an average one local firm was in grey zone and the rest 13 firms were in safe zone (Z scores> 2.99). Z scores for MNCs were substantially higher than for domestic firms. The Z score’s mean for MNCs was 5.398 compared to 4.155 for domestic firms. For domestic businesses, the Z score shifts by 0.001 or 0.24% for a 1% change in the opposite direction of the overall debt. For a 1% rise in overall debt, the Z score of MNCs decreases by 0.005 or 0.073%. Domestic companies should increase Z score by redesigning the capital structure and improving basic earning power. The study has practical implications for corporate managers, policymakers, investors, and government because future strategy, policy, and business performance depends on the zone in which the firms are situated.

indian journal of finance and banking

LEVERAGE INDUCED FINANCIAL DISTRESS OF MANUFACTURING FIRMS IN BANGLADESH: A COMPARISON BETWEEN LISTED MNCS AND DOMESTIC FIRMS BY APPLYING ALTMAN’S Z SCORE MODEL