The Use of Multi-discriminant Analysis for the Prediction of Corporate Bankruptcy in Malaysian Textile Industry

Kabiru Isa Dandago, Bello Usman Baba
(Universiti Utara Malaysia, Malaysia)

Abstract: Malaysian textile industry is a very important and dynamic sector of the Malaysian economy, which necessities the need to predict success or failure of firms in the industry. This study uses Altman’s Z-Score bankruptcy prediction model to assess financial positions of 12 sampled Malaysian textile companies. Findings from the study indicate that, from 2007 to 2011, 18.97% of the sampled companies had a Z-Score of less than 1.23 (distress), 79.3% fall amidst 1.23 to 2.9 (Grey) and just 1.73% indicates a Z-Score above 2.9 (safe). The study concludes that most of Malaysian textile companies fall within the grey zone (between 1.23-2.9) specified by the model. This suggests that most Malaysian textile companies are in the danger zone of slipping into bankruptcy and liquidation if appropriate care is not taken. Recommendations are inferred on how Malaysian textile companies will move to the safe zone of the Altman’s bankruptcy prediction model in the years ahead.

Keywords: multi-discriminant; Altman Z-Score; prediction; bankruptcy; textile industry

JEL Code: M41