Altman’s Z″-Score for Slovak Construction Companies : Do Company Size and Ownership Matter?

Abstract

Research background: Since the construction sector accounts for asignificant part of the Slovak economy, it is crucial to monitor andunderstand the financial performance of companies within thisindustry. Although Altman's model for predicting financial distress iswidely used, there is limited evidence from Slovakia, particularlyregarding how company size and ownership affect its predictions.Purpose of the article: The paper examines how firm size andownership influence different types of financial distress in Slovakia’sconstruction sector, using Altman's model. It also examines whetherthese factors can serve as reliable indicators of a company's long-termfinancial stability.Methods: For the purpose of this study, a set of 30,147 Slovakconstruction companies for the year 2023 was compiled. Each companyhas 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 tothe companies’ size and ownership were examined using statisticalhypothesis testing.Findings & Value added: The analysis revealed that domestic andforeign companies differ significantly in their Altman's Z″-scores, withforeign companies showing higher values, indicating stronger financialstability and lower distress risk. On the contrary, small, medium, andlarge companies exhibit a similar distribution of Z″-scores, suggestingthat company size does not play a crucial role in determining financialhealth.