Large percentage of listed companies risk bankruptcy: think tank

SEOUL, Dec. 28 (Yonhap) -- A large percentage of listed companies are at risk of
bankruptcy as the economic slump affects sales and access to funds, a local think
tank said Sunday.
The LG Economic Research Institute (LGERI) said as of late September, 39.8
percent or 628 of the 1,576 non-financial companies listed on the benchmark Korea
Composite Stock Price Index and over-the-counter KOSDAQ market are suffering from
problems.
It said the average Z-Score for companies whose fiscal years end in December was
2.22. This is higher than the average 1.59 score tallied in 1998, when South
Korea was suffering from the Asian financial crisis, but lower than the 3.03
reached in 2005.
Numbers exceeding 2.67 mean the company is healthy, while those below 1.81 are
interpreted as danger signs.
The Z-Score, developed by U.S. economist Edward Altman in the late 1960s, is a
tool to predict overall health and possible bankruptcy within two years by
checking multiple variables. Some scholars have claimed that the formula is over
70 percent reliable.
The LGERI said a worrisome development is that the number of companies at risk
grew rapidly toward the end of the year as the country's overall economic and
export growth entered negative territory compared to the year before.
The degree of risk is greater for KOSDAQ-listed companies, smaller companies and
those that rely heavily on exports, it added.
However, it said 32.1 percent of large conglomerates received low scores, while
39.4 percent of companies that mostly sold products on the domestic market had
low Z-Scores.
yonngong@yna.co.kr
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