Altman, Edward I., Robert G. Haldeman, and Paul Narayanan, "ZETA Analysis: A new model to identify bankruptcy risk of corporations", Journal of Banking & Finance, Vol. 1, No. 1, (June 1977), pp. 29-54.
Abstract: The paper explores the development of a bankruptcy classification model which incorporates comprehensive inputs with respect to discriminant analysis and utilizes a sample of bankrupt firms essentially covering the period 1969-1975. Financial statement data and market related measures are transformed along guidelines suggested by traditional security analysis to promote comparability of companies and to reflect the most recent reporting standards so as to make the model relevant to future analysis. The results of the study are compared with alternative bankruptcy classification strategies via the explicit introduction of prior probabilities of group membership, observed accuracies, and estimates of costs of errors in misclassification. The latter is based on cost estimates derived from commercial bank lending errors. The results of the study indicate potential significant application to credit worthiness assessment, portfolio management, and to external and internal performance analysis.