Abstract
This study has been designed to reveal whether declining trend of profitability can severely affect bankruptcy of the financial institutions. Altman Z-score, fixed effect, random effect and then Hausman test are used to achieve our research goal. After critical analysis, we find that although bankruptcy and earning volatility are positively correlated in the long-term, earning volatility has very little influence on bankruptcy indicator of banking sector in Bangladesh. That is, profitability indicators Return on Investment (ROI) and Return on Assets (ROA) can explain very little portion of total changes in Altman Z-score.
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