AbstractsBusiness Management & Administration

Exploring the Financial Performance of the Listed Companies In Kuwait Stock Exchange Using Altman’s Z-Score Model

by Dr. Payal Chadha

Institution: Swiss Management Center University
Department: Finance
Degree: Doctorate Degree
Year: 2016
Keywords: bankruptcy, distress, firms, Altman Z-score, Zmijewski score, models, stock markets, Kuwait
Posted: 03/13/2016
Record ID: 2063519
Full text PDF: https://www.academia.edu/23185816


A quantitative method was used to explore the financial performance of the listed firms on the Kuwait Stock Exchange. The number of firms explored was 196 out of a possible 206 (two firms are subsidiaries of one of the firm, and others are insurance firms excluded from this study). The listed firms were observed from 2009-2014 to understand their status in the market, and the direction they are headed towards. The financial data were gathered from the published annual reports of the respective firms and the financial statements from the Kuwait Stock Exchange website. The results, using the Altman Z-score model for the period 2009-2014, show that approximately 39.46% of the firms on average were safe; approximately 25.94% of the firms on average were distressed; approximately 15.90% of the firms on average were in a grey area; and approximately 18.71% firms on average had no available data. The bankruptcy rate could not be justified using the Zmijewski score model due to the inconclusive results and the absence of bankruptcy laws in the State of Kuwait. The financially secure sectors, which are good for investment, are petroleum and consumer goods (i.e., food, slaughterhouses, banks, and parallel markets). The worst performers that continue to operate despite the losses are real estate, telecommunications, and investment firms. This study provides insight into the financial distress level in Kuwait. The level of distress shows that major changes are necessary within firms and operations are not running smooth. Bankruptcy laws are required for firms operating in distress. This exploration is a stepping-stone for potential investors by showing the most profitable sectors for investment and for future researchers to predict accurate bankruptcy rates in the State of Kuwait.