Bankruptcy prediction models: a comparison between Altman Z-Score and Ohlson O-Score models in the Italian pharmaceutical manufacturing industry

This study aims at investigating the predictive overall performance of two bankruptcy prediction models, namely Altman Z-Score model, created in 1983, and Ohlson O-Score model, invented in 1980, within the Italian pharmaceutical manufacturing industry. The hypothesis discussed in this thesis address two research questions. First, a research gap has been identified in the application of these two models to the Italian pharmaceutical manufacturing industry. Secondly, a study by Begley, et al. (1996) claims that the Ohlson O-Score outperforms the Altman Z-score in more recent time periods. The analysis is based on two samples: 23 non-failed firms active as of December 31st, 2023, and 18 failed firms that declared bankruptcy between 2009 and 2023. For comparability, a three-years observation period was considered for each firm. Results show that both models retain predictive accuracy in the Italian pharmaceutical manufacturing industry. Complementary use enhances reliability: Altman serves as an early-warning tool, while Ohlson proves more effective as a short-term predictor. The study highlights a key limitation related to data availability and related sample size, in particular when considering financial statement data required to implement the Ohlson model.