The Altman corporation failure prediction model : applied among South African medical schemes

This study has a number of interrelated objectives that seek to understand and contextualize the Altman bankruptcy prediction model in the setting of the South African medical schemes over a ten year period (2002 to 2011). The main objective of this study is to validate the Altman Z₂ model amongst the medical schemes in South Africa; in terms of accurately classifying Z₂-scores of ≤ 1.23 and ≥ 2.9 into the a priori groups of failed and non-failed schemes. The average classification rates in the period 2002 to 2011 are as follows: 82% accuracy rate and 17.9% error rate. A linear trend line inserted in the graph shows the accuracy improving from 72% to 91% between the period 2003/2004 to 2011/2012. This outcome is consistent with the conclusion in previous studies (Aziz and Humayon, 2006: 27) that showed the accuracy rates in most failure prediction studies to be as follows: 84%, 88%, and 85% for statistical models, AEIS models and theoretical models respectively. Although this study validated the Altman model, further studies are required to test the rest of the study objectives under conditions where some of the assumptions are revised.

Grantor dc:publisher.institution

Department of Finance and Tax

Year dc:date.issued

2014

Author dc:creator

• Arens, Fanelo James

Advisor dc:contributor.advisor

• West, Darron

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/11427/13084

OAI identifier oai:identifier

oai:open.uct.ac.za:11427/13084