Predicting Bankruptcy on Oil Companies Before and After the Pandemic Using Two Altman's Z-Score Models. Industrial and Emerging Markets. Evidence from Greece
1Dr Kyriazopoulos Georgios, 2Mavrommatis Georgios
1Associate Professor, Vice President of Department of Accounting and Finance, University of Western Macedonia, Kozani, Greece, Vice President of International Conference of Development and Economy (I.CO.D.ECON), University of Peloponnese, Kalamata, Greece.
2Account Manager, Trikala City, Thessaly, Greece, Msc Banking Insurance and Finance
https://doi.org/10.47191/jefms/v6-i11-54
ABSTRACT:
This paper is prepared with the aim of establishing whether there is a possible bankruptcy of the Greek oil companies Listed on the Athens Stock Exchange in the last six years 2016-2021. This period under consideration also includes the two years of the 2019-2020 pandemic.
Design/methodology/approach
-The effort of this study is carried out using the Altman Z-Score model bankruptcy model for Emerging Markets. This paper focuses on bankruptcy, a situation which is a consequence of financial failure. Bankruptcy can happen to any organization or government body. The consequences of bankruptcy, as is known, are many and important. The main ones are the possible increase in unemployment, the decrease in the standard of living and in general the creation of a climate of economic discomfort.
Findings
-The results of this study indicate that the exit of the Greek economy from the Memorandum of the IMF and Eurozone lenders had a positive effect on the Greek oil companies listed on the Athens Stock Exchange, which is known as an emerging market. We must also note that the two years of the pandemic did not have a significant negative effects on bankruptcy issues for the same companies.
Practical implications
-The use of the two Altman's Z-Score model in this study, helps the stockholders and investors to have a conclude financial icon for stocks and bonds and make the right decisions.
Originality/value
-In order to avoid bankruptcy and therefore the negative consequences that accompany it, many economic scientists have made efforts to predict it. Its prediction can be lifesaving and ultimately prevent it. Among the many important models that have been made, for predicting bankruptcy is the Altman Z-Score bankruptcy model that has stood out because of its very good results in bankruptcy prediction. This particular model is implemented in Greece which is a country with such a strong economic crisis, which has plagued the Greek Economy since 2010, but also during the pandemic period where almost all corporate firms are struggling daily with bankruptcy. Specifically, the Z-Score Altman model will be applied comparatively for the years 2016-2021 to the companies ELIN S.A., MOTOR OIL and REVOIL S.A.E.P., ELPE S.A., which are listed on the Athens Stock Exchange, in order to establish whether there has been or if there is the possibility of bankruptcy of these companies during the time period of our study.
KEYWORDS:
Bankruptcy, Emerging Markets, Industrial, Financial Analysis, Corporate
JEL:
G1, G3, G33
REFERENCES:
1) Altman E., I., La Fleur James K., 1981, Managing a Return to Financial Health, Journal of Business Strategy, vol.2, issue 1, pp. 31 – 38.
2) Altman, E. I. 1993. Corporate financial distress and bankruptcy: A complete guide to predicting and avoiding distress and profiting from bankruptcy. New York: Wiley & Sons.
3) Altman Edward I., 2000, Predicting Financial Distress of Companies: Revisiting the Z-Score and Zeta Models", Stern School of Business, New York University
4) Altman, E. I., Brady, B., Resti, A., and Sironi, A., 2005. The link between default and recovery rates: Theory, Empirical Evidence, and Implications. Journal of Business. 78(6): pp. 2203-2228
5) Altman, E. I. 2005. An Emerging Market Credit Scoring System for Corporate Bonds. Emerging Market Review, 6(4), pp. 311-323.
6) Altman, E. I., & Hotchkiss, E. 2006. Corporate financial distress & bankruptcy (3rd ed.). Hoboken: Wiley & Sons.
7) Djaja A., R., 2020. Bankruptcy Prediction for Oil and Gas Companies in Indonesia Using Z-Score Method. Advances in Economics, Business and Management Research, volume 187. Proceedings of the 5th Global Conference on Business, Management and Entrepreneurship (GCBME) pp.126-131
8) Grice, J.S. and Dugan, M. 2001 The Limitations of Bankruptcy Prediction Models: Some Cautions for the Researcher. Review of Quantitative Finance and Accounting, 17, pp. 151-166. http://dx.doi.org/10.1023/A:1017973604789
9) Meeampol S., Lerskullawat P., Wongsorntham A., Srinammuang P., Rodpetch V., Noonoi R., (2014)
10) Onakoya A., B., Olotu A., E., (2017). Bankruptcy and Insolvency: An Exploration of Relevant Theories". International Journal of Economics and Financial Issues. 7(3), pp. 706-712.
11) Paolone F., 2015. The Application of the Emerging Market Score Model in China During the Global Crisis Period: A Countertrend Chinese Business Review, Vol. 14, No. 10, pp 484-498
12) Ross, S. A., Hillier, D. J., Westerfield, R. W., Jaffe, J., and Jordan, B. D., (2018). Corporate Finance. 12th Edition McGraw Hill.
13) White M., J., 2005. Economic Analysis of Corporate and Personal Bankruptcy Law". Working Paper 11536 http://www.nber.org/papers/w11536 National Bureau of Economic Research 1050 Massachusetts Avenue Cambridge, MA 02138 USA
14) Whitford, W.,C., 2001 International Encyclopedia of the Social & Behavioral Sciences (https://www.sciencedirect.com/referencework/9780080430768/international-encyclopedia-of-the-social-and-behavioral-sciences#book-description) (accessed 12/11/2023).
