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Using Financial Information to Differentiate Failed vs. Surviving Finance Companies in Thailand: An Implication for Emerging Economies

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  • Obeua S. Persons

    (Rider University, U.S.A.)

Abstract

This article combines qualitative and quantitative information from financial statements and auditors' reports with logistic models to differentiate failed from surviving finance companies in Thailand. Failed companies are those that were forced to suspend their operations in mid-1997. The results indicate that auditors' reports from the 1996 financial statements did not differentiate failed from surviving finance companies. On the other hand, the logistic regression models indicate that failed finance companies had lower profitability, lower foreign borrowing possibly due to their poorer credit rating, lower management quality, and smaller size. These models have relatively high predictive ability for failed finance companies and low expected costs of misclassification

Suggested Citation

  • Obeua S. Persons, 1999. "Using Financial Information to Differentiate Failed vs. Surviving Finance Companies in Thailand: An Implication for Emerging Economies," Multinational Finance Journal, Multinational Finance Journal, vol. 3(2), pages 127-145, June.
    • Handle: RePEc:mfj:journl:v:3:y:1999:i:2:p:127-145
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    2. Widiyanto & Mutamimah & Hendar, 2011. "Effectiveness of Qard Al-Hasan financing as a poverty alleviation model," Economic Journal of Emerging Markets, Universitas Islam Indonesia, vol. 3(1), pages 27-42, April.
    3. Chen, Ming-Hsiang, 2010. "The economy, tourism growth and corporate performance in the Taiwanese hotel industry," Tourism Management, Elsevier, vol. 31(5), pages 665-675.
    4. Muqaddas Khalid & Qaisar Abbas & Fizzah Malik & Shahid Ali, 2020. "Impact of audit committee attributes on financial distress: Evidence from Pakistan," International Journal of Financial Engineering (IJFE), World Scientific Publishing Co. Pte. Ltd., vol. 7(01), pages 1-19, March.
    5. Dmitry Kreptsev & Sergei Seleznev, 2017. "DSGE Model of the Russian Economy with the Banking Sector," Bank of Russia Working Paper Series wps27, Bank of Russia.
    6. Bystrom, Hans & Worasinchai, Lugkana & Chongsithipol, Srisuda, 2005. "Default risk, systematic risk and Thai firms before, during and after the Asian crisis," Research in International Business and Finance, Elsevier, vol. 19(1), pages 95-110, March.
    7. Jo-Hui Chen & Chih-Sean Chen, 2011. "The effects of international off-site surveillance on bank rating changes," Quality & Quantity: International Journal of Methodology, Springer, vol. 45(6), pages 1313-1329, October.
    8. Mr. Tigran Poghosyan & Mr. Martin Cihak, 2009. "Distress in European Banks: An Analysis Basedon a New Dataset," IMF Working Papers 2009/009, International Monetary Fund.
    9. Citterio, Alberto, 2024. "Bank failure prediction models: Review and outlook," Socio-Economic Planning Sciences, Elsevier, vol. 92(C).
    10. Chiaramonte, Laura & Croci, Ettore & Poli, Federica, 2015. "Should we trust the Z-score? Evidence from the European Banking Industry," Global Finance Journal, Elsevier, vol. 28(C), pages 111-131.
    11. Wang, Wei-Kang & Lu, Wen-Min & Lin, Yi-Ling, 2012. "Does corporate governance play an important role in BHC performance? Evidence from the U.S," Economic Modelling, Elsevier, vol. 29(3), pages 751-760.
    12. Tigran Poghosyan & Martin Čihak, 2011. "Determinants of Bank Distress in Europe: Evidence from a New Data Set," Journal of Financial Services Research, Springer;Western Finance Association, vol. 40(3), pages 163-184, December.
    13. Serhat Yuksel & Hasan Dincer Author-Workplace-Associate Professor of Finance, School of Business and Management Sciences & Umit Hacioglu, 2015. "CAMELS-based Determinants for the Credit Rating of Turkish Deposit Banks," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 4(4), pages 01-17, October.
    14. Fuad Aleskerov & V. Belousova & M. Serdyuk & V. Solodkov, 2008. "Dynamic Analysis of the Behavioural Patterns of the Largest Commercial Banks in the Russian Federation," ICER Working Papers - Applied Mathematics Series 12-2008, ICER - International Centre for Economic Research.
    15. Otchere, Isaac, 2005. "Do privatized banks in middle- and low-income countries perform better than rival banks? An intra-industry analysis of bank privatization," Journal of Banking & Finance, Elsevier, vol. 29(8-9), pages 2067-2093, August.

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    More about this item

    Keywords

    CAMEL; emerging economies; financial failure; logistic model; Thailand;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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