Testing The Effectiveness Sherrod Model to Predict Financial Distress of Investment Companies Listed in Amman Stock Exchange

Abstract

This research aimed to test the effectiveness of one of the models used in predicting financial distress of companies. In this research, Sherrod's model was addressed and applied to investment companies listed on the Amman Stock Exchange, where the scope of application included 15 distressed companies and 14 non-distressed companies.

       The study has concluded that the number of companies that achieved the Sherrod model was 4 out of 10 distressed and non-distressed companies included in the study sample, i.e. 51.7 %, while the total number of companies that did not achieve the model was 14 out of 29 companies. In general, it was noted that the Sherrod model tends to predict financial distress for investment companies on the Amman Stock Exchange, but with low accuracy rates. Therefore, more tests should be conducted for other models in order to increase the accuracy of predicting financial distress