CORRELATION BETWEEN BANKRUPTCY RISK AND MARKET PERFORMANCE OF INDONESIAN TELECOMMUNICATION COMPANIES LISTED IN INDONESIA STOCK EXCHANGE: USING ALTMAN’S ZSCORE MODEL

• Main Author: Intania (19011076), Rifa
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/30461
• Institution: Institut Teknologi Bandung

Financial distress is used to indicate a condition where a company fails or has <br /> <br /> difficulty to pay off its financial obligations to creditors. If financial distress cannot be <br /> <br /> relieved, it can lead to bankruptcy. For investors, especially long-term investor, it is <br /> <br /> prominent to be sure that a corporate will withstand and not suffer from bankruptcy. <br /> <br /> The Altman’s Z-score is an empirical model for credit-strength test that predicts the <br /> <br /> probability of corporate bankruptcy. However, the emergence of large, public service <br /> <br /> companies prompted him to develop a second Z-score model for non-manufacturing <br /> <br /> companies, which is used in this research. The formula is essentially the same as <br /> <br /> before; it just excludes the last component (sales / total assets) because Altman <br /> <br /> wanted to minimize the effects of manufacturing-intensive asset turnover. <br /> <br /> This study will aim to find the correlation between the bankruptcy risk, depicted by Zscores, <br /> <br /> and market performance, which depicted by trading volume, share price and <br /> <br /> share return, of the company using the correlation analysis. The results of this study <br /> <br /> shows significant correlations between Z-scores and trading volume of PT <br /> <br /> Telekomunikasi Indonesia, PT XL Axiata Tbk and PT Inovisi Infracom Tbk; significant <br /> <br /> correlations between Z-scores and its share price on PT XL Axiata Tbk, PT Inovisi <br /> <br /> Infracom Tbk and PT Bakrie Telecom Tbk; but show no significant correlations <br /> <br /> between Z-score and its share return of all the studied companies. The Z-score will <br /> <br /> results from the calculation using Altman’s Z-score equation model for nonmanufacturer <br /> <br /> company while the other variables are gathered from the IDX market <br /> <br /> activity records. The companies used in this research are Indonesian <br /> <br /> telecommunication companies listed in Indonesia Stock Exchange from the period <br /> <br /> January 2009 until March 2014.