Otc Market Firms: an Updated Failure/nonfailuremodel Using Altman-s Variables*

The underlying premise in most failure studies is that there exists a group of accounting and financial ratios of firms which distinguishes failed firms from nonfailed firms. Ex post facto classification analysis of OTC marker data one year, two years, three years, and four years prior to failure was used. Models incorporating Altman's variables were developed using discriminant, logit, and nearest neighbor procedures. Results indicate that these models have a low predictive power.