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Lious Ntoung Agbor Tabot ORCID logo, Félix Puime Guillén ORCID logo, Miguel Ángel Crespo Cibrán ORCID logo

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The recent financial crisis which causes bankruptcy around the world, Spain was placed at the top list because of the crucial state of its banking. This lead to a call to ensure adequate bank capitalization and reduce uncertainty regarding the strength of their balance sheets. In the light of recent event, the important of knowing the financial position of banks is imperative to shareholders. Thus, the aim of this study is to affirm the validity of Altman Z”-Score model as a predictors of the uncertainty regarding financial sector in Spain. This study takes into consideration two periods: before the banking reform and after the banking reform. It requires 30 financial institutions in Spain both big as well as small. Ratio analysis was carried out on the 30 banks before and after the reforms for five years prior to their bankruptcy or nationalisation as the Z” Score model has predictive power of up to five years before the reforms.

Keywords: Z”- Score, Bankruptcy, Banking Reform, Financial Crisis

How to cite this paper: Ntoung, L., Puime Guillén, F., & Crespo Cibrán, M. A. (2016). The effectiveness of the Spanish banking reform application of Altman’s Z-Score. Risk governance & control: financial markets & institutions, 6(4), 40-47.