Effects of Financial Distress Condition on the Company Performance: A Malaysian Perspective

Steven Liew Woon Choy (), Jayaraman Munusamy (), Shankar Chelliah () and Ally Mandari ()
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Steven Liew Woon Choy: LimKokWing University, MALAYSIA
Jayaraman Munusamy: LimKokWing University, MALAYSIA
Shankar Chelliah: School of Management, University Sains Malaysia, MALAYSIA
Ally Mandari: LimKokWing University, MALAYSIA

Review of Economics & Finance, 2011, vol. 1, 85-99

Abstract: This study was aim to assess the performance of Malaysian companies after suffering from a financial distress condition. Many companies post abnormal profits during their first few years, but the profits are not sustainable. So they face another restructuring petition or face winding up completely. To be able to show positive results after emergence, companies must improve their performance compared to previous financial results which led to downturn. The performance of companies emerging from a distress condition was assessed by the improvement of stock prices and other financial ratios that indicated the company is performing better compared to pre-bankruptcy period. This is a qualitative study where data collected from Bursa Saham Malaysia. The results show that company performance (ROE, EBIT/TA, EPS), successful company reorganisation, and management change affect stock prices positively. Whereas, the performance of second distress condition companies affect stock price performance negatively.

Keywords: Stock price; Return on equity ratio; Earning per share (search for similar items in EconPapers)
JEL-codes: G1 G11 M1 M10 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (1)

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