Altman’s Z ″-score for Slovak construction companies: Do company size and ownership matter?
Altman’s Z ″-score for Slovak construction companies: Do company size and ownership matter?

Summary/Abstract: Research background: Since the construction sector accounts for a significant part of the Slovak economy, it is crucial to monitor and understand the financial performance of companies within this industry. Although Altman's model for predicting financial distress is widely used, there is limited evidence from Slovakia, particularly regarding how company size and ownership affect its predictions. Purpose of the article: The paper examines how firm size and ownership influence different types of financial distress in Slovakia’s construction sector, using Altman's model. It also examines whether these factors can serve as reliable indicators of a company's long-term financial stability. Methods: For the purpose of this study, a set of 30,147 Slovak construction companies for the year 2023 was compiled. Each company has been subsequently classified into one of three categories: safe, grey, or distress zone, based on Altman’s Z ″-score methodology. Consequently, the differences in the resulting scores with respect to the companies ’ size and ownership were examined using statistical hypothesis testing. Findings & Value added: The analysis revealed that domestic and foreign companies differ significantly in their Altman's Z ″-scores, with foreign companies showing higher values, indicating stronger financial stability and lower distress risk. On the contrary, small, medium, and large companies exhibit a similar distribution of Z ″-scores, suggesting that company size does not play a crucial role in determining financial health.

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