Factors determining Z-score and corporate failure in Malaysian companies

Nurul Izzaty Hasanah Azhar, Norziana Lokman, Md. Mahmudul Alam (rony000@gmail.com) and Jamaliah Said
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Nurul Izzaty Hasanah Azhar: UiTM - Universiti Teknologi MARA [Shah Alam]
Norziana Lokman: UiTM - Universiti Teknologi MARA [Shah Alam]
Jamaliah Said: UiTM - Universiti Teknologi MARA [Shah Alam]

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Abstract: Predicting the sustainability of a business is crucial to prevent financial losses among shareholders and investors. This study attempts to evaluate the Altman model for predicting corporate failure in distressed and non-distressed Malaysian companies based on the data of financially troubled companies which are classified as Practice Note 17 (PN17) and matching similar non-PN17 companies during the period 2013 to 2017. This study utilizes panel ordinal and panel random effects regressions. Findings show that the liquidity, profitability, leverage, solvency, and efficiency ratios are negatively significantly associated with corporate failure and bankruptcy. The leverage ratio is determined to be the strongest indicator of bankruptcy, followed by profitability, liquidity, solvency, and efficiency ratios. The findings will help companies' management bodies implement suitable strategies to prevent further financial leakage, thereby ensuring continuous and sustainable return on investment and profits for investors and shareholders.

Keywords: Corporate Failure; Financial Distress; PN17 companies; Ratio analysis; Z-Score (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-cfn, nep-rmg and nep-sea
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Published in International Journal of Economics and Business Research, 2021, 21 (3), pp.370-386. ⟨10.1504/IJEBR.2021.114381⟩

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Journal Article: Factors determining Z-score and corporate failure in Malaysian companies (2021)
Working Paper: Factors Determining Z-score and Corporate Failure in Malaysian Companies (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03520192

DOI: 10.1504/IJEBR.2021.114381

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