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The suitability of the Altman Z-score nodels for assessing the financial health of the manufacturing sector: Finnish evidence
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School of Business |
Bachelor's thesis
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en
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32+10
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Financial distress in companies poses risks to stakeholders and the national economy. Therefore, the need for simple, statement-based early warning tools is crucial. This thesis evaluates the applicability of Altman’s original Z-score (1968) to Finnish listed industrial firms and benchmarks it against the revised Z′-score. Using panel data for 18 manufacturing and industrial companies on Nasdaq Helsinki over 2010-2024 from the Orbis database, the study analyses descriptive statistics, risk-zone distributions and firm-level time trends.
The results suggest that the sample firms are structurally healthy but that the two models differ markedly in calibration. The original Z-score is relatively optimistic, classifying 54% of firm-years as “Safe”. At the same time, the Z′-score is more conservative. It places 71% of observations in the “Grey” zone. Nonetheless, both models produce plausible rankings. The strong performers such as KONE and Ponsse, consistently receive high scores. Simultaneously, distressed firms, such as Componenta, remain in lower zones.
Risk levels are broadly stable over time. Overall, Altman’s models function well as transparent screening tools for the Finnish market but should be complemented with qualitative assessment, and market-specific credit-risk models. Particularly, “grey zone” companies are evaluated.