The prediction of financial failure risk in insurance companies listed in the Amman Stock Exchange using the Altman model

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Abstract

This study aimed to evaluate the ability of the Altman model to predict financial failure risk in insurance companies listed on the Amman Stock Exchange (ASE) and to assess the accuracy rate of the model’s predictability. The study population and sample consisted of all Jordanian insurance companies listed on the ASE during the period from 2018 to 2022, totaling 23 companies. These were divided into 19 non-failed companies and four failed companies. The study adopted a descriptive analytical approach, utilizing Statistical Package for the Social Sciences (SPSS) to analyze the data and the Mann-Whitney U test to examine the study hypotheses. The findings revealed that the Altman model is capable of distinguishing between failed and non-failed insurance companies, with an overall accuracy rate of 56.7 percent for the study period, which is consistent with the results of Dolinšek and Kovač (2024) and Cindik and Armutlulu’s (2021) studies. However, this accuracy rate decreases as the year of analysis moves further from the year in which the failure occurred. The study recommends using additional predictive models alongside the Altman model to enhance the quality of the decision-making process.

Keywords: Insurance Companies, Financial Failure, Amman Stock Exchange, Altman Model

Authors’ individual contribution: Conceptualization — N.A.A.J.; Methodology — N.A.A.J.; Formal Analysis — N.A.A.J.; Investigation — R.H.A.; Resources — R.H.A.; Writing — Original Draft — R.H.A.; Writing — Review & Editing — A.A.B.A.; Supervision — N.A.A.J.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G33, M41, M49

Received: 01.11.2024
Revised: 24.02.2025; 25.05.2025; 21.07.2025
Accepted: 01.09.2025
Published online: 03.09.2025

How to cite this paper: Al Jundi, N. A., Bani Atta, A. A., & AlKhuffash, R. H. (2025). The prediction of financial failure risk in insurance companies listed in the Amman Stock Exchange using the Altman model [Special issue]. Risk Governance & Control: Financial Markets & Institutions, 15(3), 176–186. https://doi.org/10.22495/rgcv15i3sip1