PREDICTING CORPORATE BANKRUPTCY USING MULTIPLE DISCRIMINANT ANALYSIS: A STUDY OF SELECTED FAILED AND HEALTHY NIGERIAN BANKS
PREDICTING CORPORATE BANKRUPTCY USING MULTIPLE DISCRIMINANT ANALYSIS: A STUDY OF SELECTED FAILED AND HEALTHY NIGERIAN BANKS
No Thumbnail Available
Date
1997-07
Authors
IBRAHIM, AHMED
Journal Title
Journal ISSN
Volume Title
Publisher
Abstract
The pervasive problem of distress in the banking sector in Nigeria in recent
years requires the development of a cost effective, reliable and quick technique
for predicting potential failures. Although several studies on distress in the
banking sector in Nigeria has been carried out, most of them were limited to
causes and efficacy of distress rather than predictability.
The objectives of this study were to test the predictability of corporate
bankruptcy prior to occurrence by applying Edward I. Altman's Multiple
Discriminant Analysis (MDA) and to make recommendation based on the
findings.
In carrying out the study, a random sample of 29 banks in Nigeria were
selected without bias or stratification. From data obtained in the banks financial
statements, Z- scores for the period 1989-94 were calculated using the
Microfost Excel Computer Software.
The results showed that Z - scores for the selected banks ranged from 0.0768-
0.4020. Comparing these Z- scores with Altman's minimum of 2.99 for nonbankruptcy
and below 1.8 for bankruptcy, all the banks in Nigeria could be
classified as bankrupt. The discrimination amongst banks may only be in
terms of extent of the distress. This finding confirms and justifies the recent
directive by the Federal Government for banks to raise their paid-up share
capital to at least N500 million by the end of 1998.
vii
The results showed that there are early warning signals that can be detected
from readily available data to predict fairly accurately, the prospect of
bankruptcy and these signals can lead to timely intervention to avert the
prospect of bankruptcy.
Description
A project Submitted to the Postgraduate School,
Ahmadu Bello University, Zaria in partial fulfillment of the
requirements for the degree of Master of Business
Administration (MBA)
Keywords
PREDICTING,, CORPORATE,, BANKRUPTCY,, MULTIPLE DISCRIMINANT ANALYSIS:,, FAILED AND HEALTHY,, NIGERIAN BANKS