Open AccessThe use of Z-Score to predict UTP loans
Author(s) -
Maurizio Dallocchio,
Salvatore Ferri,
Alberto Tron,
Matteo Vizzaccaro
Publication year - 2020
Publication title -
corporate ownership and control
Language(s) - English
Resource type - Journals
eISSN - 1810-0368
pISSN - 1727-9232
DOI - 10.22495/cocv18i1art13
Subject(s) - insolvency , bankruptcy , logistic regression , logit , actuarial science , sample (material) , bankruptcy prediction , corporate governance , standard score , business , econometrics , accounting , economics , statistics , finance , mathematics , chemistry , chromatography
The Z-Score model developed by Altman in 1968 is considered one of the more reliable predictors of bankruptcy. In contraposition to the existing literature, the paper aims to investigate the Z’-Score and Z’’-Score ability to predict unlike-to-pay (UTP) loans, which is an event far earlier than insolvency. To investigate this relation, the study uses a unique sample of UTP loans, provided by a major Italian bank, and applies, as a predictive model, the Logit model, well known in academics. Final results confirm that the Z’-Score and the Z’’-Score are able to forecast UTP loans. Furthermore, the findings of the papers reveal the importance of corporate governance variables in predicting financial failures.