IDEAS home Printed from https://ideas.repec.org/a/ids/amerfa/v6y2021i3-4p314-331.html
   My bibliography  Save this article

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

Author

Listed:
  • Azhar Mohamad
  • Mohamed Azad
  • Imtiaz Mohammad Sifat

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.

Suggested Citation

  • Azhar Mohamad & Mohamed Azad & Imtiaz Mohammad Sifat, 2021. "Predicting financial distress in an emerging market: corporate actions, accounting ratios, or both?," American Journal of Finance and Accounting, Inderscience Enterprises Ltd, vol. 6(3/4), pages 314-331.
    • Handle: RePEc:ids:amerfa:v:6:y:2021:i:3/4:p:314-331
    as

    Download full text from publisher

    File URL: http://www.inderscience.com/link.php?id=117217
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ids:amerfa:v:6:y:2021:i:3/4:p:314-331. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sarah Parker (email available below). General contact details of provider: http://www.inderscience.com/browse/index.php?journalID=229 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.