Abstract

 

Accepted 18th October, 2019.

 

The study discuss the predictive prowess of the Altman(1968 and 2000) corporate failure prediction models on the quality of accounting information. The models are tested using secondary data of 18 non-financial listed firms on the Ghana Stock Exchange following the adoption of IFRS in Ghana for the period 2006 to 2008. The predictive powers of the models are computed using Z-scores for the pre and post IFRS adoption and conclusions made based on the overall type II errors recorded between the two periods. The findings provide evidence that the predictive powers of the Altman (1968) corporate failure prediction model depends on the quality of accounting information. This is supported by the decline in the overall type II error from about 67% to about 61%between the pre and post IFRS adoption periods respectively. The findings also suggest that the revised corporate failure prediction model subsequently developed by Altman (2000) is not influenced by the quality of accounting information prepared by management. The overall type II error recorded for the two periods is about 67%implying that the revised model is not dependent on the quality of accounting data.

 

Keywords: Corporate failure, predictive prowess, type II error, IFRS adoption, corporate bankruptcy or financial distress