Review of Accounting Studies

, Volume 1, Issue 4, pp 267–284

Bankruptcy classification errors in the 1980s: An empirical analysis of Altman's and Ohlson's models

  • Joy Begley
  • Jin Ming
  • Susan Watts

DOI: 10.1007/BF00570833

Cite this article as:
Begley, J., Ming, J. & Watts, S. Rev Acc Stud (1996) 1: 267. doi:10.1007/BF00570833


Empirical accounting researchers often use Altman's (1968) and Ohlson's (1980) bankruptcy prediction models as indicators of financial distress. While these models performed relatively well when they were estimated, we show that they do not perform as well in more recent periods (in particular, the 1980s), even when the coefficients are re-estimated. When we compare the performance of Ohlson's original model to our re-estimated version of his model and to that of Altman's original and re-estimated models, we find that Ohlson's original model displays the strongest overall performance. Given that Ohlson's original model is frequently used in academic research as an indicator of financial distress, its strong performance in this study supports its use as a preferred model.


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Copyright information

© Kluwer Academic Publishers 1996

Authors and Affiliations

  • Joy Begley
    • 1
  • Jin Ming
    • 2
  • Susan Watts
    • 3
  1. 1.University of British ColumbiaVancouverCanada
  2. 2.Shanghai Jiao Tong UniversityShanghaiChina
  3. 3.Indiana UniversityUSA

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