This paper compares Altman's Z-Score with the distance to default calculated from Merton (1974) on their abilities in predicting corporate financial distress. Using the data of Taiwan's listed companies from 1997 to 2000, we investigate which measure contains more information about financial distress. The empirical results of the intra-cohort analysis, logit regressions, and power curves all reach the same conclusion that Z-Score significantly outperforms distance to default. We also test whether this difference in predicting power is caused by stock price manipulations undertaken by the distressed firms' controlling shareholders, or by stock market bubbles. However, neither hypothesis is supported by our empirical results.