Empirical Analysis of Bankruptcy Risk in Indian Commercial Banks: A Study Using Altman's Z-Score Model
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Abstract
The study uses the Altman Z-score model to determine if the ten Indian commercial banks that were chosen—five of which are public banks and the other five are private banks—are in financial distress throughout the period of 2017 to 2023.
Methodology
The secondary data used in this study's approach was obtained from annual reports that were posted on several websites, including Trendlyne, Money Control, and annual reports.
Findings
According to the report, all banks are in a safe zone with little chance of going bankrupt in the upcoming years, thus it is evident that investors can put their money wherever for higher profits and it is proven by t-test that there is no significant difference between the Z-scores(Financial stability) of private and public sector banks.
Research limitations
Only a restricted number of Indian commercial banks are included in this study; five are drawn from the public sector and five from the private sector. The data collection period extends from 2017 to 2023.
Managerial implication
The evaluation advises that the management teams of the public banks have to probe into the assets and liabilities of the company i.e. company has to maintain their retained earnings. The management teams have to study their low performance compared to private sector banks. Also, they have to find out why there is a negative score in retained earnings in these banks. Private sector banks have good scores but still, to maintain a good score in coming years they have to strive further.
Originality
This study mainly depicts about financial distress of selected 10 banks of which 5 are from the public sector and 5 are from private sector banks by using the Altman Z-score model and proving that all the banks are in a safe zone for the upcoming years. The research work selected five public and private sector banks from India as samples to compare Altman Z- scores for assessing their financial soundness which adds to its originality.