The Efectiveness Of Ohlson's O-Score To Predict Financial Distress Of Go-Public Firms In Indonesia For The Period Of 2004-2005
Abstract
Nugraha, Aprianto (2007) "The effectiveness of Ohlson's O-Score to predict
financial distress of go-public firms in Indonesia for the period of 2004-2005"
Yogyakarta: Management Department, International Program, Faculty of
Economics, Universitas Islam Indonesia
The study of predicting financial distress or bankruptcy has already been
conducted from many years ago and in different countries. The result of these
researches varied depends on the researcher's method and the economical and
political condition of the country where the research is conducted. This study is a
popular study because every company in each and every country in the world has
the risk of experiencing financial distress and bankruptcy. That is why that the
research about predicting financial distress and bankruptcy is very important.
This research is conducted with the basis of trying to provide additional
information about the prediction tools that can be used in Indonesia. In Indonesia,
the study of predicting financial distress and bankruptcy is also popular. The most
popular prediction tool in Indonesia is Altman's (1968) Z-Score. This tool has its
weaknesses and strengths. The weaknesses ofthis tool can be eliminated if we use
Ohlson's (1980) O-Score. That is why this research used O-Score as its data
analysis technique.
This research uses the data of published firm's financial statement in the
period of 2004-2005 in Indonesian Capital Market Directory (ICMD). The
sampling technique is purposive sampling means that the firms must qualify to a
certain criteria in order to be used in the research. The criteria for the distressed
firms are delisted from Jakarta Stock Exchange because of financial distress, have
loss in three consecutive years (2003-2005), and have loss of more than 75% of its
paid-in capital in 2004 and/or 2005. The criterion for solvent firms is having no
loss in three consecutive years (2003-2005).
The result of the research shows that Ohlson's (1980) O-Score can be used
in Indonesia. The result of the predictability of the overall variables also exceeds
the original research. In Ohlson's (1980) research, the overall predictability of the
variables are 96.3% while this research shows 100% correct for overall variable.
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