Predicting financial distress for mobile telecommunication companies listed in Kuwait Stock Exchange using Altman s model

Abstract

Purpose- With the bankruptcy of many large companies in recent years especially after the global financial crisis in 2008, the attention to bankruptcy prediction models has increased dramatically. The aim of this study is to examine the financial soundness of the companies listed in the mobile telecommunication sector in the Kuwait stock exchange (KSE). Methodology- Many bankruptcy models were developed as an early warning systems for any distress a company might face. This paper uses one of the most common models, Altman Z-score model, to examine the likelihood of bankruptcy and the financial soundness of mobile telecommunication companies listed in Kuwait stock exchange market during the period from 2013 to 2016. Findings- The results showed that out of the three companies operating in Kuwait, only one of them had a healthy financial position while the other two companies are facing financial distress. Conclusion- The study found that mobile telecommunication companies in Kuwait are facing the risk of bankruptcy due to their negative working capital which makes them vulnerable to any unexpected short-term obligations. As a result, these companies should work to reduce the gap between their current assets and current liabilities.