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


Author Info

  • 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)

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    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.

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    Bibliographic Info

    Article provided by Better Advances Press, Canada in its journal Review of Economics & Finance.

    Volume (Year): 1 (2011)
    Issue (Month): (August)
    Pages: 85-99

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    Handle: RePEc:bap:journl:110407

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    Keywords: Stock price; Return on equity ratio; Earning per share;

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    1. Michael Cooper & Roberto C. Gutierrez, Jr. & Bill Marcum, 2005. "On the Predictability of Stock Returns in Real Time," The Journal of Business, University of Chicago Press, University of Chicago Press, vol. 78(2), pages 469-500, March.
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    8. Edward I. Altman & Tushar Kant & Thongchai Rattanaruengyot, 2009. "Post-Chapter 11 Bankruptcy Performance: Avoiding Chapter 22," Journal of Applied Corporate Finance, Morgan Stanley, Morgan Stanley, vol. 21(3), pages 53-64.
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    11. Shehu Usman Rano Aliyu, 2009. "Stock Prices and Exchange Rate Interactions in Nigeria: A Maiden Intra-Global Financial Crisis Investigation," The IUP Journal of Financial Economics, IUP Publications, IUP Publications, vol. 0(3 & 4), pages 7-23, September.
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