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Considering the utility of Altman's Z-score as a strategic assessment and performance management tool

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PurposeThe purpose of this article is to provide commentary on the utility of Altman's Z-score as a strategic assessment and performance management tool. This possibility is suggested in the recently published book Measuring Organizational Performance ‐ Metrics for Entrepreneurship and Strategic Management Research (Northampton, MA: Edward Elgar, 2006) by Robert B. Carton and Charles W. Hofer. Design/methodology/approachThis paper is a corporate manager's analysis of the utility of Altman's Z-score as a strategic assessment and performance management tool based on published research, with suggestions for further research. FindingsThe analysis supports Carton and Hofer's findings with respect to the utility of the Z-score as a strategic assessment and performance management tool. Practical implicationsWhile the Z-score is both popular and widely used in the fields of credit risk analysis, distressed investing, M&A target analysis, and turnaround management it has received relatively little attention as a strategic assessment and performance management tool. The findings of Carton and Hofer's study, in conjunction with the impressive results achieved by GTI Corporation, suggest that applying the Z-score in strategy and performance management may also be warranted, especially after more research is undertaken. Originality/valueThis article offers a manager's perspective on new research that indicates the potential of a popular financial distress metric to provide insight in the areas of entrepreneurship and strategic management.
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Keywords: Assessment; Change management; Corporate strategy; Performance management

Document Type: Research Article

Publication date: September 11, 2007

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