Bankruptcy Prediction and Corporate Governance: Revisiting the Z-score in the Post-Global Financial Crisis Period

Adam Jarbøl & Axel Bevort

Student thesis: Master thesis


The purpose of this paper is to examine whether Altman's Z-Score bankruptcy prediction model is still valid and accurate in the post-Global Financial Crisis period and whether it can be improved by including corporate governance-related indicators. To examine this question, the paper employs multiple discriminant analysis to construct two separate models based on a sample of 30 bankrupt and 30 non-bankrupt US-listed firms. Our empirical results show improved predictive ability with the inclusion of corporate governance variables. We confirm that Altman’s 1968 model remains valid, but a re-estimation to the specific period produces a greater predictive ability. The paper contributes to the literature by constructing a bankruptcy prediction model that includes both financial ratios and corporate governance indicators and is relevant for a wide range of stakeholders including policymakers, financial market participants and individual firms.

EducationsMSc in Applied Economics and Finance, (Graduate Programme) Final Thesis
Publication date2020
Number of pages124