Predicting Listed Companies’ Failure in Jordan Using Altman Models: A Case Study

The Altman Z-score (1968) model and the Altman Z’’-Score model (1993) have been created and applied in theUS and other developed countries in a specific era. It is therefore possible that their results are not generalisableto less developed countries in today’s context. We tested the generalisability of these two statistical failureprediction models in the Jordanian environment. We used a sample of 71 failed and 71 non-failed companiesthat were chosen based on the same industry, year of data, and a comparable size of total assets. We tested if thetwo models predict failures as they did in the US and European countries and if these models are thus relevantfor Jordanian firms. We found that the original Altman Z-Score (1968) model still works effectively. The modelis generalisable in the Jordanian context for assessing failed industrial companies. For service companies,however, we found that the Altman models could not provide strong indicators to differentiate between failedand non-failed companies.