| Summary: | This paper reviews the financial distress prediction via Z-score and Hazard models around the globe over decades. This study also aims to synthesize the fundamental idea of financial distress prediction models and provide a deep understanding of the underlying rationale of each model. The sources of data collected include documents and text specifically from rating agencies; Standard & Poor's and Fitch report, authors review and a meta-analysis on financial distress prediction models was also carried out. While Z-score model employed accounting numbers and financial ratios in demonstrating predictive financial distress for companies, Hazard model on the other hand engaged three market-driven variables to identify financial distress firms; market size, past stock returns and idiosyncratic standard deviation of stock returns. Moreover, Hazard model reveals that about half of the accounting ratios used to predict failure firm is not statistically related to failure. © 2014 Taylor & Francis Group.
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