Prediction ability of Altman model for bankruptcy in Greek enterprises

This study initially decodes and analyzes the financial robustness of companies that bankrupt in 2012, aiming to determine with the use of historical data the factors that could forecast the bankruptcy of these enterprises. The year 2012 was selected because Greece was the unique country from the GIIPS states (Greece, Ireland, Italy, Portugal and Spain) in which paradoxically 2012 is the year with inversion of the tendency and reduction (6.74%) in the number of recorded corporate bankruptcies. For the research purpose the second- revised Altman Z-score model is used, which was applied in a ten sample of bankrupted enterprises from various branches. The rate of success of the model in the final sample of enterprises one year before the bankruptcy is 100%, which means higher predictability than the percentage of 94% exported by Altman in 1968. As long as it concerns the rate of success 2 years before bankruptcy it was presented smaller compared to the -1 year (80%), however comparing the result with the application of Altman (72%), the model in the present research presented also higher prediction ability. The reversal of the trend of the legally recorded bankruptcies in Greece seems to be due to statistical rather than economic reasons. Many small and medium size firms as well as sole traders led to closure, but their bankruptcy was not recorded as judicial bankrup