The Accuracy of Financial Distress Measurement on Altman Z-Score, Grover, Springate, and Zmijewski Methods (Study on Companies in LQ-45 Index Listed in Indonesia Stock Exchange During the 2015 - 2019 Period)

Abstract

The aim of this study is to identify the accuracy level of Altman Z-Score, Springate, Grover, and Zmijewski methods in predicting the financial distress condition and to see if there is distinctive result from each method in predicting potential financial distress. The population of this study comprised of the entire companies in LQ-45 index, listed in Indonesia Stock Exchange (BEI) during the 2015-2019 period. The technique in selecting the samples was purposive sampling. It was obtained from 28 companies in LQ-45 index during the 2015-2019 period. The technique analysis used in this research was paired sample t-test, which defined as a comparison of the significance of the four financial distress prediction methods that made of the company real condition. The result of the analysis indicated that there was a significant difference between several prediction methods of potential financial distress in LQ-45 index companies listed in Indonesia Stock Exchange (BEI), and it was unearthed by Grover prediction which showed the highest level of accuracy, in which the accuracy was at 100%, whilst the accuracy rate of the Springate method and the Altman Z-Score method are 96% and 75% respectively. Finally, Zmijewski's prediction method resulted an accuracy rate at 43%.