APPLICATION OF EDWARD ALTMAN Z SCORE MODEL ON MEASURING FINANCIAL DISTRESS OF COMMERCIAL BANKS LISTED ON RWANDA STOCK EXCHANGE (2015-2019)

CPA, ALPHONSE NTAWUMENYUMUNSI, CPFMA, CPA, FA, ELIJAH KIHOOTO MARINGA

Abstract


The overall aim of this research was to assess how factors of financial distress affected the financial performance of Commercial Banks listed on RSE from 2015 to 2019 by applying Altman failure prediction model. The researcher targeted 3 Banks in this study. This concerned Bank of Kigali Plc (BK Plc), Kenya Commercial Bank Ltd (KCB Ltd) and I&M Bank Plc. Establishing whether liquidity as a factor of the distress affects the financial performance of commercial banks was the first objective of this study. The rise from 22.1, 23.8 and 50.7 percent of demand deposits, quasi money and treasury bills holding from the period 2016 to 2019 is the main cause of operating with liquidity problems as revealed by the study. The application of Z-Score model revealed that there is a highly likelihood that the bankruptcy will occur because Z-Score is below 1.8 for all 3 Banks under study for five years. 

Key words: Factors of Financial Distress, High Likelihood of Bankruptcy

CITATION:  Ntawumenyumunsi A., & Maringa, E. K. (2022). Application of Edward Altman Z Score model on measuring financial distress of commercial banks listed on Rwanda Stock Exchange (2015-2019). The Strategic Journal of Business & Change Management, 9 (1), 130 – 146.


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DOI: http://dx.doi.org/10.61426/sjbcm.v9i1.2169

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