Financial Health & Corporate Performance-a Comparison of Manufacturing Companies in China & India

Foo See Liang and Shaakalya Pathak

Journal of Asian Development, 2016, vol. 2, issue 1, 18-29

Abstract: The People's Republic of China (China) and India are two leading economies in Asia Pacific. This study examines the relationship between the financial health, as measured by the Altman Z-Score, and corporate performance, as measured by the Return on Equity (ROE), of listed manufacturing companies in these two markets. A linear regression was conducted between these variables to determine the magnitude and direction of their relationships. The trends of Z-Scores over a fourteen-year period are also analysed. The analysis covers the period from 2000 to 2013 (inclusive) and yielded a statistically positive correlation between ROE and the Z-Score for both markets. China and India both registered moderate-to-strong mean and median Z-Scores. However, China is comparatively healthier. These findings further support the economic stature of these two markets as Asian giants.

Keywords: Financial Health; Corporate Performance; Manufacturing; Altman Z-Score; Return on Equity (search for similar items in EconPapers)
Date: 2016
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