Luận văn thạc sĩ UEH comparison of accountin based bankruptcy prediction models of altman(1968),

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UNIVERSITY OF ECONOMICS INSTITUTE OF SOCIAL STUDIES

HO CHIMINHCITY THE HAGUE

VIETNAMTHE NETHERLANDS

VIETNAM – NETHERLANDSPROGRAMME FOR M.A IN

DEVELOPMENT ECONOMICS

Comparison of accounting-based bankruptcy prediction models of

Altman(1968), Ohlson(1980) and Zmijewski(1984)using

Vietnamese listed companies during 2008 – 2014

A thesis submitted in partial fulfilment of the requirements for the degree of

MASTER OF ARTS IN DEVELOPMENT ECONOMICS

ByNGUYEN THI PHUONG TRAM

Academic Supervisor:

DR.NGUYEN THI THUY LINH

HO CHI MINH CITY, December 2015

DECLARATION

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“I certify that the substance of this thesis has not already been submitted for any degree

and have not been currently submitted for any other degree.

I certify that to the best of my knowledge and help received in preparing this thesis and

all sources used have been acknowledged in this thesis.”

HCMC, December 2015

Signature

NGUYEN THI PHUONG TRAM

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ACKNOWLEDGEMENTS

Actually, this thesis could not have been finished without a collaborative experience

involving the helps from many people. I would like to acknowledge and express my

heartfelt gratitude to those who give me the tremendous support to complete this thesis.

I greatly express my special thanks to my supervisor Dr. Nguyen Thi Thuy Linhwho

was abundantly helpful and offered invaluable assistance, support and guidance

through finishing this process.

I express my warm thanks to Mr. Pham Khanh Nam for all his academic

recommendations.

I am using this opportunity to express my gratitude to everyone who supported me

throughout the course of this MBA project. Thank you so much!

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ABSTRACT

Bankrupt prediction is practical research topic and attractsmore attention of debtors,

creditors, shareholders and other stakeholders. Moreover, it can be applied in a wide

variety of situations to business managers make crucial decision. The bankruptcy

prediction models have been developed based on old original modes ofAltman(1968),

Ohlson(1980) and Zmijewski(1984)usingmultivariate discriminate, logit and probit

analysis respectively. This thesisconducted the comparison of predictive power among

these modelsusingVietnameselisted firms during the period from 2008 to 2014. The

data is taken from listed companies in HOSE and HNX stock market and characterized

the determinants of financial distress in terms of firm accounting andfinancial ratios.

To compare the predictive power of these models one year, two years and three year

beforehand bankruptcy, the analysis of differences of accuracy rates and Receiver

Operating Curves is applied.

Overall, Ohlson’sprobit model (1980) performed most accurate on the Vietnam listed

companies within investigation periods. This implies that Ohlson’smodel is the best

predictor for bankruptcy likelihood for the listed companied in Vietnam. However,

since the unstable accuracy rates and the highest frequency of Type I and Type II

errors, such resultshould be set into perspective and studied cautiously.

Keywords: bankruptcy prediction;multivariate discriminate analysis; logit model;

probit model.

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ABBREVIATIONS

MDA: Multivariate discriminate analysis

OLS Ordinary Least Squares

A: Altman

O Ohlson

Z Zmijewski

ROCReceiver Operating Curves

AUROC Area under the ROC curve

CRV Credit Rating of Vietnam

GDPGross Domestic Product

GNP Gross National Product

HOSE Ho Chi Minh City Stock Exchange

HXN Hanoi City Stock Exchange

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TABLE OF CONTENTS

CHAPTER 1: INTRODUCTION.................................................................................9

1.1 The empirical problem ..........................................................................................9

1.2 Problem Statement ..............................................................................................10

1.3 Research objective and methodology..................................................................11

1.4 Contribution ........................................................................................................12

1.5 Outline.................................................................................................................13

CHAPTER 2: LITERATURE REVIEW...................................................................14

2.1 Concepts................................................................................................................14

2.2 Bankruptcy prediction models..............................................................................16

2.2.1 Z-score model-Altman (1968)...........................................................................16

2.2.2 O-score model- Ohlson (1980)......................................................................................18

2.2.3 Zm-score- Zmijewski (1984).........................................................................................19

2.3 Empirical studies of comparing bankruptcy prediction models...........................20

CHAPTER 3: METHODOLOGY..............................................................................24

3.1 Analytical framework ...........................................................................................24

3.2 Research Models...................................................................................................26

3.2.1 Multiple discriminant analysis- Altman (1968)........................................................27

3.2.2 Logit regression - Ohlson (1980)..................................................................................29

3.2.3 Probit regression - Zmijewski (1984)..........................................................................31

3.3 Research Methodology .........................................................................................32

3.3.1 Pseudo R2

and eigenvalue...............................................................................................33

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