The Role of risk management disclosures in conforming bankruptcy risk calculated using Altman Z-Score (Study of coal companies in Indonesia)

Abstract

This research aims to provide an overview of the financial condition of coal companies in Indonesia, so that it assists investors interested in coal industry in Indonesia. The research began with a preliminary study about the condition of the coal industry in Indonesia from 2006 to 2016. The study then expanded to include global influence through global coal price in Altman’s bankruptcy prediction model and company age as variable to depict company sustainability advantage. In addition to assessing bankruptcy risk quantitatively, this research also assesses bankruptcy risk by reviewing risk management disclosures of the companies. Risk management practice potrays a firm’s ability in handling risks. This research illustrated that risk management disclosure value is in line with bankruptcy risk calculated using Altman z-score, except for BUMI.