FAILURE PREDICTION: AN EMPIRICAL ANALYSIS OF SELECTED INDIAN BANKS
Abstract
Purpose: The axle of this study is to evaluate the financial distress or chance of failure in the selected Indian public and private sector banks by using Altman Z Score model. Design / Methodology / Approach: Altman’s z-score model evaluates and measures financial distress status of corporation, which helps in failure prediction. Five banks each in public and private sector category were selected to measure financial distress. Secondary data were collected from moneycontrol.com and economictimes.indiatimes.com for the period 2013 to 2017. Findings: Results indicate that the financial position of selected banks under study is safe means they are financially sound and there is no sign of financial distress than for one bank, hence no chance of financial failure. It can be concluded that there is no chance of failure in near future for any of the select bank since none of them falls under the zone having less than 1.10 Z-score except for Axis bank in the year 2017, where it is very close to this value, which means it is difficult to predict about this bank. However, certainly the bank management needs to pay a serious attention to improve upon its financial soundness. Originality / Value: The study has attempted to measure the chance of failure or financial distress in selected Indian banks. This study has tried to address the most important concern of bank customers. The study is very significant in the current situation when the depth and width of NPAs are widening every passing day and have led to so much anxiety amongst bank customers in India. The study has used widely accepted Altman’s Z-score model to measure the chance of financial failure. JEL CODIFICATION: G21; G33
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