Financial Distress Prediction through Altman Z-Score Model: A Case Study of State Owned Commercial Banks of Bangladesh

Subrata Deb Nath ., Prasenjit Kumer Biswas ., Md. Aminur Rashid ., Munna Rani Biswas .


Purpose: Banks are the backbone of the economy. The bank collects money temporarily from the public and lends to other people as per need. Banks should concern about the soundness of their financial health. The purpose of this study is to predict the financial health of the State Owned Commercial Banks (SOCBs) of Bangladesh using Altman Z-score Model. Methodology: The Z-score uses working capital to total assets, retained earnings to total assets, earnings before interest and tax to total assets, shareholders equity to total liabilities to measure the financial health of the banks. The study is analytical in nature and is carried out based on only secondary data. The published Annual Reports of the six SOCBs for the period of 2010-2018 collected for secondary data and financially analyzed through Altman Z-score Model for prediction of financial distress. Findings: The study found that with only one exception, the financial health of the SOCBs is unsatisfactory. One exception is only Bangladesh Development Bank which fell into grey zone among the six SOCBs as it secured on an average 1.52 score. However, the remaining others are found in Distress zone as they secured on an average < 1.10 score. Hence, it is said that the financial health of the Basic Bank Limited is the worst and BDBL is the best among the six banks. Implications: The implication of the study is that respective authority of the SOCBs of Bangladesh can use the findings of the study to take necessary actions for financial distress.


Altman Z-score, financial distress, prediction, state owned commercial banks

Full Text:



Afrin, R. (2017). Analyzing the potential of Altman’s Z-score for prediction of market performance and share returns – A case study of the cement industry in Bangladesh. The AUST Journal of Science and Technology, 6(1&2), 1-16.

Al-Manaseer, S. R., and Al-Oshaibat, S. D. (2018). Validity of Altman Z-Score Model to Predict Financial Failure:

Evidence from Jordan. International Journal of Economics and Finance.10 (8), 181-189.

Al-Rawi, K. (2008). The Use of Altman Equation for Bankruptcy Prediction in an Industrial Firm (Case Study). International Business & Economics Research Journal. 7(7), 115-128.

Altman, E. I. (2000). Predicting Financial Distress of Companies: Revisiting the Z-Score and ZETA® Models. Journal of banking & Finance. 1-54.

Apoorva D. V., Curpod, S. P., and Namratha, M. (2019). Application of Altman Z-Score Model on Selected Indian

Companies to Predict Bankruptcy. International Journal of Business and Management Invention. 8 (1), 77-82.

Chowdhury, A., and Barua, S. (2009). Rationalities of Z-Category Shares in Dhaka Stock Exchange: Are

They in Financial Distress Risk? BRAC University Journal.6 (1), 45-58. last visit:20/10/2019 at 4:40 pm last visit:20/10/2019 at 4:45 pm

Jahan K. (2018). Determinants of Financial Distress: Evidence from the State-owned Commercial Banks in Bangladesh. Journal of Business Studies. 39(1), 51-68.

Khaddafi, M.; Falahuddin, F., Heikal, M., and Nandari, A. (2017). Analysis Z-score to Predict Bankruptcy in Banks Listed in Indonesia Stock Exchange. International Journal of Economics and Financial Issues. 7(3), 326-330.

Khatun, F. (2018). Banking Sector in Bangladesh: Moving from Diagnosis to Action. Centre for Policy Dialogue.


Mwawughanga, C. W. and Ochiri, G. (2017). Application of Edward Altman’s Z-Score Model on Measuring Financial Health of Commercial Banks in Kenya. The Strategic Journal of Business & Change Management. 4 (2), 722.

Parvin, A., Rahman, B., and Nitu, A. A. (2016). Prediction of Financial Health of Banking Industry in Bangladesh

Using Altman’s Z -Score: A Comparison Between State-Owned Commercial Banks and Private Commercial Banks, Proceedings of the International Conference for Bankers and Academics 2016, Dhaka.

Qamruzzaman (2014). Predicting Bankruptcy: Evidence from Private Commercial Banks in Bangladesh. International Journal of Financial Economics. 2 (3), 114.

Sajjan, R. (2016). Predicting Bankruptcy of Selected Firms by Applying Altman’s Z-Score Model. International

Journal of Research–Granthaalayah. 4 (4), 152-158.

Sanjaya, A., Lindrianasari, and Aminah (2015). Bankruptcy Analysis of Banking Companies in Indonesia Period 2001-2012. International Journal on Economics and Social Sciences. 1 (1), 20-24.

Turk, Z. (2017). Financial Failure Estimate in BIST Companies with Altman (Z-Score) and Springate (S-Score) Models. Journal of Economics and Administrative Sciences. 1 (1), 1-14.

Uddin, M. M., and Masud, M. A. K. (2015). Financial Health Soundness Measurement of Private Commercial Banks in Bangladesh: An Observation of Selected Banks. The Journal of Nepalese Business Studies. 9 (1), 20-36.

Will Kenton. (2019, May 27), Investopedia contributors, Investopedia. Retrieved 12:33, October 27, 2019, from


  • There are currently no refbacks.

Creative Commons License
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Editorial Office:

Educational Research Multimedia & Publications,
S.N. 21, Plot No 24, Mirza Ghalib Road Malegaon Nasik,
Maharashtra India - 423203.
+919764558895 (whatsapp),,

Copyrights © 2010-2021 - ERM Publications, India     

This work is licensed under

click site richard mille replica a fantastic read rolex replica read the article копии часов read this article orologi replica.