Predicting financial distress in an emerging market: corporate actions, accounting ratios, or both?

Azhar Mohamad, Mohamed Azad and Imtiaz Mohammad Sifat

American Journal of Finance and Accounting, 2021, vol. 6, issue 3/4, 314-331

Abstract: This paper investigates the utility of corporate actions in predicting financial distress in the context of an emerging country: Malaysia. Recognising the dominance of historical accounting ratios in distress prediction models, we set out to test if employing more current information in the form of corporate action fares better. To this end, we employ three logistic regression models on data from 54 firms and find that corporate actions, on a stand-alone basis, outperform pure accounting ratios and a pooled combination of both. The most significant corporate actions are frequency of capital issuance and shuffling of audit committees. These findings are novel for Malaysia and relatively scarce in broader empirical literature. Meanwhile, among the accounting ratios, working capital and sales volumes emerge as significant predictors of distress, both of which have extensive empirical precedents.

Keywords: financial distress; emerging market; bankruptcy; Malaysia; accounting ratio. (search for similar items in EconPapers)
Date: 2021
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.inderscience.com/link.php?id=117217 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ids:amerfa:v:6:y:2021:i:3/4:p:314-331

Access Statistics for this article

More articles in American Journal of Finance and Accounting from Inderscience Enterprises Ltd
Bibliographic data for series maintained by Sarah Parker ().