Proceedings of 5th International Conference of Economic, Business and Government Challenges 2022. Vol.

1 No. 1 August 2022: 9-15

Analysis of The Effect of Bankruptcy Predictions with Models

Altman, Springate, Ohlson, Foster, Zmijewski, and Grover on
The Return of Shares in Entertainment and Film Companies
Listed on The Indonesia Stock Exchange in 2018-2021
Khansa Daffa1*, Aldilla Iradianty2, Helmi Adiningtyas3
Telkom University, Bandung, Indonesia
[email protected]*; [email protected];
[email protected]

Abstract. A company will not be free from the risk of bankruptcy, especially when where the conditions of
entertainment and movies are consumed at home, while producers' activities are disrupted because they usually produce
in the field. This study aims to determine the effect of financial statements on bankruptcy prediction analysis, including
financial ratios to stock returns in entertainment and film companies listed on the Indonesia Stock Exchange. This
research uses a descriptive quantitative method with panel data and secondary data obtained on the Indonesia Stock
Exchange from 2018 to 2021. Data analysis using the E-Views program. The results of the bankruptcy prediction from
this study using the Altman, Springate, Ohlson, Foster, Zmijewski, and Grover models has no significant effect on
stock returns, but this bankruptcy prediction must always be done periodically to avoid actual bankruptcy conditions
and as an effort to save the company's performance, especially financial performance.
Keywords: Altman; Springate; Ohlson; Foster; Stock Return.

I. Introduction
A company will not be free from the risk of bankruptcy, especially when conditions are at home
where entertainment and movies are consumed at home, while producers' activities are disrupted because
they usually produce in the field, not to mention that many of the industry's competitors come from abroad
who have previously take advantage of online networks that can be easily accessed from home with
interesting content, in addition to the weakening of the economy causing income to decline, this is felt by
MNC Picture and MD Entertainment, which are companies in the entertainment and film industry listed on
the Indonesia Stock Exchange.
To find out the prediction of the company's bankruptcy, the Altman, Springate, Ohlson, Foster,
Zmijewski, and Grover models are used so that companies and investors can find out the current conditions
of various bankruptcy prediction models, besides that this study will also examine the effect of bankruptcy
predictions from the model is on stock returns, because since this company was published, they have been
suspended by the regulator.

II. Literature Review

Financial Statement
According to Titman et al. (2018), financial statements are divided into several types based on the
presentation process.
1. The income statement is a record that shows the income generated through the company, the prices used
to create the revenue, and the income earned over a certain period.
2. The balance sheet is a record containing information about the company's assets, liabilities, and capital.
3. A cash flow statement is a record that shows the company's cash inflows and outflows over a certain
period.

Financial Distress
When a company faces liquidity problems, the company will likely experience financial
difficulties, and if this is not resolved immediately, it can result in bankruptcy. Avoiding bankruptcy
requires various policies, strategies, and external and internal stakeholders (Fahmi, 2018). Financial distress
is a condition where the company cannot fulfill its obligations. Financial distress has two meanings.
Financial distress is a very cruel natural selection that makes the company eliminated from the market if
the company cannot control the situation so that the company will be in a state of default and bankruptcy.
Then secondly, financial distress is a condition that can be profitable if the company manages it well, and
then the situation becomes a reminder to deal with problems that arise (Kristianti, 2019).

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2022. Vol. 1 No. 1 August 2022: 9-15

Bankruptcy
Bankruptcy is one thing that all companies should avoid. Knowing the potential for bankruptcy is
one of the objectives of balance sheet analysis. Companies that know the potential for bankruptcy can make
long-term plans to prevent this situation (Wulandari et al., 2016). This bankruptcy begins with the
occurrence of a default which is the culmination of financial distress where the company in this condition
is unable to pay debts or interest to creditors when they fall due. With this, the company will find it difficult
to get external funding.

Altman Model
The Altman Z-Score was proposed in 1968 by Dr. Edward I. Altman, professor of financial economics at
NYU's Stern School of Business. Altman uses five financial indicators: working capital to assets, retained
earnings to total assets, earnings before interest and taxes to total assets, book value of shares to book value
of liabilities, and total sales assets using Multivariate Discriminant Analysis (MDA). Later, this model was
redesigned by Altman. This new model makes it possible to predict the bankruptcy of private sector
companies and manufacturing companies that have gone public (Wulandari et al., 2016).

Springate Model
The Springate model is a bankruptcy prediction model based on the research of G.I.V. Springate
1978, known as the Springate model or the Canadian model. This research was conducted in a process
modeled by Altman. This process uses stepwise multiple discriminant analysis to select 4 of 19 financial
ratios to correctly see the difference between healthy and insolvent companies (default) (Adji & Abdul,
2019).

Ohlson Model
Ohlson Score was discovered by James Ohlson in 1980. When he found this model, Ohlson
questioned the Multiple Discrimination Analysis (MDA) model found by Altman (1968). For comparison,
Ohlson uses logistic regression in his calculation formula. Ohlson's model provides three formulas for
predicting bankruptcy, namely one year before bankruptcy, two years before the bankruptcy, and
predictions in one and two years before bankruptcy (Wulandari et al., 2016).

Foster Model
Foster was created by George Foster through research conducted to predict the bankruptcy of US
railroad companies from 1970 to 1971 (Nasri et al., 2018). In predicting bankruptcy, Foster uses a univariate
model with two ratios where the first ratio shows the amount of operating expenses related to income, and
the second ratio shows the amount of operating profit compared to the interest paid.

Zmijewski Model
Zmijewski has a sample consisting of 840 companies, 40 companies experiencing financial
difficulties and 800 companies not experiencing financial difficulties. Data were collected from 1972 to
1978. The statistical model used by Zmijewski is the same as Ohlson's statistical model, namely logit
regression (Adji & Abdul, 2019).

Grover Model
Grover was created by Jeffrey S. Grover by designing and reassessing the Altman Z-Score model.
Grover argued that a company with a score of 0.02 indicates that the company is bankrupt, then with a score
of 0.01 the company is not bankrupt and if the company is between these two limits, the company is in the
gray area (Effendi, 2018).

III. Research Method

This research method uses quantitative methods. The purpose of this research is to use descriptive
research. This research uses a descriptive quantitative method with panel data and secondary data obtained
on the Indonesia Stock Exchange from 2018 to 2021. Financial reports will be retrieved through the official
website of the Indonesia Stock Exchange (www.idx.co.id), Yahoo Finance (finance.yahoo.com), and
Google Finance (google.com/finance) from 2018 to 2021 for each company. There are 2 companies that
will be used as samples in this study, namely, MD Pictures and MNC Studios International. In this study,
there are dependent variables and independent variables. The dependent variables in this study are Altman
(X1), Springate (X2), Ohlson (X3), Foster (X4), Zmijewski (X5), and Grover (X6) models, and then the
independent variable is a stock return (Y). Data analysis using the E-Views program.

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2022. Vol. 1 No. 1 August 2022: 9-15

IV. Results and Discussion

Results
Prediction Bankruptcy
Prediction Altman Model Bankruptcy
Based on results from Altman Z-Score calculation shows that there are 22 calculations company
no bankrupt in the period time certain or on the whole period (1st quarter of 2018 - 3rd quarter of 2021)
and in predictable companies are in the gray area there are 8 calculations company in period time certain.

Prediction Springate Model Bankruptcy

Based on results from calculation prediction Springate Model bankruptcy show that There are 12
calculations which company the enter in category companies that have potency in experience bankruptcy
in the period time certain or on the whole period (1st quarter of 2018 - 3rd quarter of 2021). Then, 18
calculations other company enter in category no bankrupt in the period time certain or on the whole period
(1st quarter of 2018 – 3rd quarter of 2021).

Prediction Ohlson Model Bankruptcy

Based on results from calculation prediction The Ohlson Model bankruptcy shows that there are
28 calculations company no bankrupt in the period time certain or on the whole period (1st quarter of 2018
- 3rd quarter of 2021) and there are predictable company is at bankrupt there are 2 calculations company in
period time certain.

Prediction Foster Model Bankruptcy

Based on results from calculation prediction Foster Model bankruptcy shows that there are 26
calculations no bankrupt in the period certain or on the whole period (1st quarter of 2018 – 3rd quarter of
2021) and in predictable companies bankrupt there are 4 calculations company in period time certain.

Prediction Zmijewski Model Bankruptcy

Based on results from calculation prediction Zmijewski model bankruptcy, it shows that there are
30 values calculation enter in category companies that have potency in experience overall bankruptcy
period (1st quarter of 2018 – 3rd quarter of 2021). Because the value of X < 0, then company in condition
bankrupt.

Prediction Grover's Model Bankruptcy

Based on results from calculation prediction Grover Model bankruptcy shows there are 30 values
calculation enter in category companies that have potency no bankrupt overall period (1st quarter of 2018
– 3rd quarter of 2021). Since the value of G > 0.01, then company in condition no bankrupt.

Research Results Stock Return

Stock return movement show that company entertainment and movies experience fluctuation
where that movement of stock returns in the period 1st quarter of 2018 – 3rd quarter of 2021. Stock returns
highest owned by MNC Studios International in the period 3rd quarter of 2021 amounted to 0.54 and stock
returns Lowest owned by MNC Studios International in the period 3rd quarter of 2018. Calculation results
from stock return movement this seen existence fluctuation increase or drop stock return value from period
3rd quarter 2018 to 3rd quarter of 2021.

Assumption Test Classic

On the results of the assumption test classic there is four testing, the first could be seen in the
normality test carried out using the Jarque-Bera test could concluded that all residual data used in data
processing on six variable X to variable Y is normally distributed. Second, the results of the autocorrelation
test using the Breusch-Godfrey Serial Correlation LM Test can also be concluded that all data used in data
processing on six variable X to Y variable is not occur problem with autocorrelation. Third, the results of
the Multicollinearity test concluded that correlation between variable X is not occur multicollinearity
problem. Finally, Heteroscedasticity is carried out using the Glejser test could concluded that all data used
in data processing on six variable X to Y variable is not occur problems with heteroscedasticity.

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2022. Vol. 1 No. 1 August 2022: 9-15

Panel Data Regression Test

This t-test will do to know connection six prediction models bankruptcy to return stock. This t-test
can also use for verifying truth or hypothesis (H0). On retrieval the decision is based on statistical test value
obtained from data with provision testing hypothesis as following.
1. If significant value > 0.05, then H0 is accepted which means with method Partial variable dependent no
influence variable independent by significant.
2. If significant value > 0.05, then Ha is rejected which means with method Partial variable dependent no
influence variable independent by significant.
Following this is hypothesis t-test regarding influence prediction bankruptcy to stock return.

Influence Prediction The Altman (X1) Model Bankruptcy on stock return (Y)
Based on the tests that have been done, the model used in this panel data regression is common
effects models to know the effect of Altman Model on stock returns. Following this is results testing panel
data regression for t-test.
Table 1. t-test Altman Model

Source: E-Views Output

Based on Table 1, the results of the Altman Model panel data regression t-test that has done show
that the significant value of Altman Model is 0.8846 where significant value > 0.05. Based on a provision
in testing hypothesis, if significant value > 0.05, then H0 is accepted and can be concluded that significant
Altman model not influential to stock return.

Influence Prediction Springate Model Bankruptcy (X2) on stock return (Y)

Based on the tests that have been done, the model used in this panel data regression is common
effects models to know the influence of the Springate Model on stock returns. Following this is results
testing panel data regression for t-test.
Table 2. t-test Springate Model

Source: E-Views Output

Based on table 2, the results of the panel data regression t test that has been done show that the
significant value of Springate Model is 0.3523 where significant value > 0.05. Based on provision in testing
hypothesis, if significant value > 0.05, then H0 is accepted and can be concluded that significant Springate
Model no influential to stock return.

Influence Prediction the Ohlson Model Bankruptcy (X3) on stock return (Y)
Based on the tests that have been done, the model used in this panel data regression is common
effects models to know the influence of the Ohlson Model on stock returns. Following this is results testing
panel data regression for t-test.

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2022. Vol. 1 No. 1 August 2022: 9-15

Table 3. t-test Ohlson Model

Source: E-Views Output

Based on Table 3, the results of the panel data regression t-test that has been done this show that
the significant value of Ohlson Model is 0.5530 where significant value > 0.05. Based on provision in
testing hypothesis, if significant value > 0.05 then H0 is accepted, and it can be concluded that significant
Ohlson model is not influential to stock return.

Influence Prediction Foster 's Model Bankruptcy (X4) on stock returns (Y)
Based on the tests that have been done, the model used in this panel data regression is common effects
models to know the influence of the Foster Model on stock returns. Following this is results testing panel
data regression for t-test.
Table 4. t-test Foster Model

Source: E-Views Output

Based on Table 4, the results of the panel data regression t-test that has been done show that the
significant value of Foster Model is 0.6403 where significant value > 0.05. Based on a provision in the
testing hypothesis, if significant value > 0.05, then H0 is accepted, and it can be concluded that significant
Foster Model is not influential to stock return.

Influence Prediction Bankruptcy of the Zmijewski Model (X5) on stock return (Y)
Based on the tests that have been done, the model used in this panel data regression is common
effects models to know the influence of the Zmijewski Model on stock returns. Following this is results
testing panel data regression for t-test.
Table 5. t-test Zmijewski Model

Source: E-Views Output

Based on Table 5, the results of the panel data regression t-test that has been done show that values
significant of Zmijewski model is 0.7518 where significant value > 0.05. Based on a provision in testing

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Daffa, et al/Proceedings of 5th International Conference of Economic, Business and Government Challenges
2022. Vol. 1 No. 1 August 2022: 9-15

hypothesis, if significant value > 0.05 then H0 is accepted and can be concluded that significant Zmijewski
model no influential to stock return.

Influence Prediction Grover Model Bankruptcy (X6) on stock return (Y)

Based on the tests that have been done, the model used in this panel data regression is common
effects models to know the influence of Grover Model on stock returns. Following this is results testing
panel data regression for t-test.
Table 6. t-test Grover Model

Source: E-Views Output

Based on Table 6, the results of the panel data regression t-test that has been done show that the
significant value of Grover Model is 0.5600 where significant value > 0.05. Based on a provision in testing
hypothesis, if significant value > 0.05 then H0 is accepted and can be concluded that significant Grover
model is not influential to stock return.

Discussion
Based on the results of calculations that Altman Z-Score, there are 22 calculations of companies
that are not bankrupt in a specific period or the entire period (1st quarter of 2018 – 3rd quarter of 2021) and
in companies that are eight predicted to be in the grey area for a specific period. The Springate Model
bankruptcy prediction calculation results show that there are 12 calculations in which the company is
included in the category of companies that have the potential to experience bankruptcy in a certain period
or the entire period (1st quarter of 2018 - 3rd quarter of 2021). Then, in 18 other calculations, the company
is included in the category of not going bankrupt during a certain time or the whole period (1st quarter of
2018 – 3rd quarter of 2021).
The results of the Ohlson Model bankruptcy prediction calculation show that there are 28
calculations of companies that are not bankrupt in a specific period or the entire period (quarter 1 of 2018
- quarter 3 of 2021) and in companies that are predicted to be bankrupt there are 2 calculations of companies
in a specific period. The results of the calculation of the bankruptcy prediction of the Foster Model show
that there are 26 calculations of not going bankrupt in a specific period or the entire period (quarter 1 of
2018 - quarter 3 of 2021) and in companies that are predicted to go bankrupt there are 4 calculations of
companies in a specific period.
The results of the Zmijewski Model bankruptcy prediction calculation show that 30 calculated
values fall into the category of companies that have the potential to experience bankruptcy in the entire
period (1st quarter of 2018 – 3rd quarter of 2021). Because the value of X < 0, the company is in default.
The results of the calculation of the bankruptcy prediction of the Grover Model show that 30 calculated
values fall into the category of companies that have the potential to not go bankrupt in the entire period (1st
quarter of 2018 – 3rd quarter of 2021). Because the value of G > 0.01, the company is not in a state of
bankruptcy. Stock return movement show that company entertainment and movies experience fluctuation
where that movement of stock returns in the period 1st quarter of 2018 – 3rd quarter of 2021.
Stock returns highest owned by MNC Studios International in the period 3rd quarter of 2021
amounted to 0.54 and stock returns lowest owned by MNC Studios International in the period 3rd quarter
of 2018. Calculation results from stock return movement this seen existence fluctuation increase or drop
stock return value from period 3rd quarter 2018 to 3rd quarter of 2021. The results of the Altman model
panel data regression t-test can be seen in Table 1 shows that the Altman Model significant value is 0.8846
where the significant value is > 0.05, then H0 is accepted, and it can be concluded that the Altman Model
significantly does not affect stock returns.
The Springate model shows that the significant value of the t-test results is 0.3523, where a
significant value > 0.05 can be seen in Table 2, then H0 is accepted. It can be concluded that the Springate
model significantly does not affect stock returns. The results of the t-test of the Ohlson Model in Table 3

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2022. Vol. 1 No. 1 August 2022: 9-15

show that the significant value is 0.5530 where the significant value is > 0.05, then H0 is accepted, and it
can be concluded that the Ohlson Model has no significant effect on stock returns.
The Foster model in Table 4 shows that the significant value of the t-test results is 0.6403 where
the significant value is <0.05, then H0 is accepted, and it can be concluded that the Foster Model
significantly does not affect stock returns. Table 5 shows the results of the Zmijewski Model t-test of 0.7516
where the significant value is > 0.05, then H0 is accepted, and it can be concluded that the Zmijewski Model
significantly does not affect stock returns. The results of the t-test of the Grover Model in Table 6 show
that the significant value is 0.5600 where the significant value is > 0.05, then H0 is accepted, and it can be
concluded that the Grover Model significantly does not affect stock returns.

V. Conclusions
The results of the bankruptcy prediction from this study using the Altman, Springate, Ohlson,
Foster, Zmijewski, and Grover models has no significant effect on stock returns, so to see the condition of
a company is not enough to examine financial statements; but can pay attention to external factors that
affect stock returns, including the country's economic conditions, natural conditions, politics, government
regulations and issues originating from within or outside the country.
This research is expected to provide knowledge and insight, especially in the field of financial
management, namely the analysis of the ability of financial managers to the Analysis of the Effect of
Bankruptcy Predictions with the Altman, Springate, Ohlson, Foster, Zmijewski, and Grover models of
Stock Returns in Entertainment and Film Companies Listed on the Stock Exchange. Indonesia in 2018-
2021. Based on the research that has been done, the author is very aware that this research still has
limitations. For further research, it is expected to be able to analyze on different samples.

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