Evaluation of Corporate Bankruptcy Prediction Models in Indonesia

  • Sebastian Siburian
  • Imo Gandakusuma


This study aims to determine the value of various bankruptcy prediction models in the Indonesian business environment and to determine an accurate bankruptcy prediction model in the Indonesian business environment. This study uses data from companies listed on the Indonesia Stock Exchange that have financial statements for the financial year ending in 2015 - 2019. This study processes data with 4 bankruptcy prediction models, namely Altman EM (Altman et al., 1998), Ohlson (1980), Taffler (1983), Zmijewski (1984). In addition, this study also includes re-estimating the coefficients, testing the Chi-Square validity, and calculating type I II errors. This study will produce an analysis of financial performance on the risk of bankruptcy based on these 4 models. The results of this study indicate RE Ohlson has a high level of accuracy and the lowest error I compared to other models and is expected to provide information and become one of the considerations in decision making.


Abdullah, N.A.H., Ahmad, Halim, A., & Rus, M.D. Rohani. (2008). Predicting Corporate Failure of Malaysia’s Listed Companies: Comparing Multiple Discriminant Analysis, Logistic Regression and the Hazard Model. International Research Journal of Finance and Economics. 15. 201-217.
Agarwal, Vineet & Taffler, Richard. (2007). Twenty-Five Years of the Taffler Z-Score Model: Does It Really Have Predictive Ability?. Accounting and Business Research-ACCOUNT BUS RES. 37. 285-300. 10.1080/00014788.2007.9663313.
Almilia, L. S., & Kristijadi, E. (2003). Analisis Rasio Keuangan Untuk Memprediksi Kondisi Financial Distress Perusahaan Manufaktur Yang Terdaftar di Bursa Efek Jakarta. Jurnal Akuntansi & Auditing Indonesia, 7(2), 183–210.
Altman, E. I. (1968). Financial ratios, discriminant analysis and the predication of corporate bankruptcy. The Journal of Finance, 23(4), 589-609.
Altman E.I., Hartzell J., Peck M. (1998) Emerging market corporate bonds — a scoring system. In: Levich R.M. (eds) Emerging Market Capital Flows. The New York University Salomon Center Series on Financial Markets and Institutions, vol 2. Springer, Boston, MA. https://doi.org/10.1007/978-1-4615-6197-2_25
Altman, E., & Hotchkiss, E. (2006). Corporate financial distress and bankruptcy. Hoboken, N.J.: Wiley.
Altman, E. I., Zang, L., & Yen, J. (2007). Corporate financial distress diagnosis in China. Salomon Center Working Paper, 1-30.
Beaver, W. H. . (1966). Financial Ratios As Predictors of Failure. Journal of Accounting Research, 4(1966), 71–111.
Collins, R., & Green, R. (1982). Statistical methods for bankruptcy forecasting. Journal Of Economics And Business, 34(4), 349-354. doi: 10.1016/0148-6195(82)90040-6.
Gambling, T. (1985). The accountant's guide to the galaxy, including the profession at the end of the universe. Accounting, Organizations and Society, 10(4), 415-425.
Gilbert, L., Menon, K., & Schwartz, K. (1990). PREDICTING BANKRUPTCY FOR FIRMS IN FINANCIAL DISTRESS. Journal Of Business Finance & Accounting, 17(1), 161-171. doi: 10.1111/j.1468-5957.1990.tb00555.
Grice, J., & Dugan, M. (2003). RE-ESTIMATIONS OF THE ZMIJEWSKI AND OHLSON BANKRUPTCY PREDICTION MODELS. Advances In Accounting, 20, 77-93. doi: 10.1016/s0882-6110(03)20004-3.
Kleinert, M. K. (2014). Comparison of bankruptcy prediction models of Altman (1969), Ohlson (1980) and Zmijewski (1984) on German and Belgian listed companies between 2008-2013 (Master's thesis, University of Twente).
Mehrani, S., Bahramfar, N., & Qayoor, F. (2005). A study of the relationship between conventional liquidity ratios and ratios from cash flow statements for assessing the going concern of firms. Australian Journal of Basic Applied Sciences, 5(11).
Ohlson, J. A. (1980). Financial Ratios and the Probabilistic Prediction of Bankruptcy. Journal of Accounting Research, 18(1), 109.
Outecheva, N. (2007). Corporate Financial Distress : An Empirical Analysis of Distress Risk. Doctoral dissertation, University of St. Gallen.
Oz, I. O., & Simga-Mugan, C. (2018). Bankruptcy prediction models’ generalizability: Evidence from emerging market economies. Advances in Accounting, 1–12
Platt, H. D., & Platt, M. B. (2002). Predicting corporate financial distress: reflections on choice-based sample bias. Journal of economics and finance, 26(2), 184-199.
Ross, S. A., Westerfield, R. W., Jaffe, J., & Jordan, B. D. (2016). Corporate Finance. New Jersey: McGraw-Hill Education.
Shumway, T. (2001). Forecasting bankruptcy more accurately: A simple hazard model. The journal of business, 74(1), 101-124.
Taffler, R. J. (1983). The assessment of company solvency and performance using a statistical model. Accounting and Business Research, 13(52), 295-308.
Zhang, L., Altman, Ere., & Yen, J. (2010). Corporate financial distress diagnosis model and application in credit rating for listing firms in zhn. Frontiers Of Computer Science In China, 4(2), 220-236. doi: 10.1007/s11704-010-0505-5.
Zmijewski, M. (1984). Methodological issues related to the estimation of financial distress prediction models. Journal of Accounting Research, 59-82.
How to Cite
SIBURIAN, Sebastian; GANDAKUSUMA, Imo. Evaluation of Corporate Bankruptcy Prediction Models in Indonesia. Asian Journal of Research in Business and Management, [S.l.], v. 3, n. 3, p. 15-23, sep. 2021. Available at: <https://myjms.mohe.gov.my/index.php/ajrbm/article/view/15103>. Date accessed: 10 aug. 2022.