Applicability of Altman Model in Predicting Financial Distress: Evidence from Rural Bank in Indonesia

Authors

  • Devy M. Puspitasari *, Djoko Roespinoedji , Sotarduga Napitupulu

Abstract

This study aims to know the applicability of Altman Model in predicting financial distress
evidence rural bank in East Java, Indonesia. The method used in this study uses logit. The data used are
secondary data obtained from Bank publication reports during period 2009 - 2018. The population used in
this study is rural banks in East Java and sample selection based on purposive sampling. The results showed
that capital, liquidity, profitability and productivity have significant influence to financial distress bank. This
finding is consistent with finding’s Altman (2000) in commercial bank. Rural banks also need to pay
attention to solvency so banks can carry out their intermediary role. Channeling credit optimally and
keeping liquidity far from the threshold to increase profits. Accordingly, banks will avoid financial distress.
This research will be useful in knowing the applicability of Altman Model in predicting financial distress,
especially rural banks from existing models based on existing parameters.

Published

2020-10-15

Issue

Section

Articles