The predictability of financial rations on corporate financial distress

Kong, Mui Yean (2010) The predictability of financial rations on corporate financial distress. Masters thesis, Universiti Malaysia Sabah.

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Abstract

Current fluctuation and uncertainties in the global economics create challenges in the survival of the company. The companies under financial distress have to bear with the distress cost and at high risks to experience bankruptcy. There are a number of financial ratios that one can extract from the company's audited account. However, not every financial ratio has the ability to give an early warning to the financial practitioners that the company is facing distress. Three objectives of this study are (1) to investigate the ability of a set of financial ratios in predicting financial distress, (2) to identify a set of dominance financial ratios in predicting financial distress and (3) to compare the ability of a set of dominance financial ratios in predicting financial distress between consumer products and construction sector. Logit regression analysis was conducted to test the hypotheses. The findings of this study suggested that company with high earnings per shares and return on assets are less likely to experience financial distress. The ratios that able to predict the status of financial distress in both sectors are different. However, there are insufficient proofs to support that liquidity ratio and leverage ratio have the ability to predict corporate financial distress. Since the findings in this field are inconsistent, there is a need to continue the efforts in investigating and developing the financial distress prediction model that can suit to a particular industry, especially in Malaysia context.

Item Type:	Thesis (Masters)
Keyword:	Financial distress prediction, Financial ratios, Bankruptcy risk, Corporate failure, Logit regression
Subjects:	H Social Sciences > HG Finance > HG1-9999 Finance > HG201-1496 Money
Department:	SCHOOL > School of Business and Economics
Depositing User:	DG MASNIAH AHMAD -
Date Deposited:	22 May 2025 11:08
Last Modified:	22 May 2025 11:08
URI:	https://eprints.ums.edu.my/id/eprint/43859

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