Edward I. Altman (born June 5, 1941) is a Professor of Finance, Emeritus, at
New York University
New York University (NYU) is a private university, private research university in New York City, New York, United States. Chartered in 1831 by the New York State Legislature, NYU was founded in 1832 by Albert Gallatin as a Nondenominational ...
's
Stern School of Business
The Leonard N. Stern School of Business (also NYU Stern, Stern School of Business, or simply Stern) is the business schools, business school of New York University, a private university, private research university based in New York City. Founded ...
. He is best known for the development of the
Altman Z-score
Example of an Excel spreadsheet that uses Altman Z-score to predict the bankruptcy.html" ;"title="probability that a firm will go into bankruptcy">probability that a firm will go into bankruptcy within two years
The Z-score formula for predic ...
for predicting
bankruptcy
Bankruptcy is a legal process through which people or other entities who cannot repay debts to creditors may seek relief from some or all of their debts. In most jurisdictions, bankruptcy is imposed by a court order, often initiated by the deb ...
which he published in 1968. Professor Altman is a leading academic on the High-Yield and Distressed Debt markets and is the pioneer in the building of models for credit risk management and
bankruptcy prediction.
Altman used to teach "Bankruptcy and Reorganization" and "Credit Risk Management" in the Risk Management Open Enrollment program for
''Stern'' Executive Education. He also teaches in the school's MBA programs and has been a Stern faculty member since 1967.
Research
The
Altman Z-score
Example of an Excel spreadsheet that uses Altman Z-score to predict the bankruptcy.html" ;"title="probability that a firm will go into bankruptcy">probability that a firm will go into bankruptcy within two years
The Z-score formula for predic ...
is a
multivariate formula for a measurement of the financial health of a company and a powerful diagnostic tool that forecasts the probability of a company entering
bankruptcy
Bankruptcy is a legal process through which people or other entities who cannot repay debts to creditors may seek relief from some or all of their debts. In most jurisdictions, bankruptcy is imposed by a court order, often initiated by the deb ...
. Studies measuring the effectiveness of the Z-Score have shown that the model has an 80%–90% reliability. Altman's equation did an excellent job at distinguishing bankrupt and non-bankrupt firms and is used by a large number of investment managers and hedge funds in their investment strategies and management. In addition, his Z-score model has been used by management of distressed companies to avoid having to file for bankruptcy reorganization. Altman's models have been used by banking institutions throughout the world in order to quantify the probability of default of their lending portfolios.
He compared owning the debt vs. equity for major companies that went bankrupt. The debt did better. One columnist wrote that a particular case was a goldmine for the debt and a landmine for the stock.
In the 1990s Altman and his PhD student Professor Edith Hotchkiss coined the term ''Chapter 22'', which refers to companies which file for bankruptcy more than once. In a 1990 study he also defined the term "distressed debt securities," pertaining to firms whose bonds yield more than 10% above the "risk-free" government bond rate.
Background
Altman holds a
B.A. in Economics, (
CCNY, 1963); an MBA (
UCLA
The University of California, Los Angeles (UCLA) is a public land-grant research university in Los Angeles, California, United States. Its academic roots were established in 1881 as a normal school then known as the southern branch of the C ...
, 1965); and a
Ph.D. in
Finance
Finance refers to monetary resources and to the study and Academic discipline, discipline of money, currency, assets and Liability (financial accounting), liabilities. As a subject of study, is a field of Business administration, Business Admin ...
(UCLA, 1967).
Altman was inducted into the Fixed Income Society's Hall of Fame in 2001 and was an inaugural inductee into the Turnaround Management's Hall of Fame
in 2008. Altman has been awarded Honorary Doctorates from Lund University (Sweden) in 2011 and the Warsaw School of Economics in 2014. He also was named Honorary Professor by the University of Buenos Aires (Argentina) in 1996 and Vigo University (Spain) in 2017. He was named one of the "100 Most Influential People in Finance" by the Treasury & Risk Management magazine in 2005. He is also a co-founder of the International Risk Management Conference, which celebrated its 10th anniversary in 2017.
He is the brother of
Stuart Altman, a noted health care economist, and Ellen Altman-Stein an MBA in Special Education.
Books
Altman is the author, co-author, or editor of 25 books, including:
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Altman Z-score
Example of an Excel spreadsheet that uses Altman Z-score to predict the bankruptcy.html" ;"title="probability that a firm will go into bankruptcy">probability that a firm will go into bankruptcy within two years
The Z-score formula for predic ...
References
External links
HomepageMaster of Science in Risk Management Program for Executives
International Risk Management ConferenceThe Risk Banking and Finance Society
{{DEFAULTSORT:Altman, Edward I.
1941 births
Living people
New York University Stern School of Business faculty
Corporate finance theorists
City College of New York alumni
UCLA Anderson School of Management alumni