Advanced Search
MyIDEAS: Login

Corporate failure prediction: a study of public listed companies in Malaysia

Contents:

Author Info

  • Shuk-Wern Ong
  • Voon Choong Yap
  • Roy W.L. Khong

Abstract

Purpose – The objective of this paper is to develop a model that can predict financial distress amongst public listed companies in Malaysia using the logistic regression analysis. Design/methodology/approach – The logistic regression analysis used in this paper is geared towards developing a model that can predict financial distress amongst public listed companies in Malaysia. Findings – The results prove that five financial ratios have been found to be significant and useful for corporate failure prediction in Malaysia. The overall predictive accuracy is 91.5 percent and this demonstrates that the logistic regression analysis used is a reliable technique for financial distress prediction. In addition, the predictive accuracy of the model in this paper is higher than that of previous studies, which utilised discriminant analysis rather than the method adopted in this research. Originality/value – The economic crisis mostly began to affect Malaysia's economic standing in July 1997 causing many companies to fall into financial distress, as they were unable to cope with the unexpected downturn. A financial distress prediction model is therefore required to act as a predictor of Malaysian public listed companies' well-being prior to a financial crisis and to gauge the warning signals of the onset of a downturn in order to strategize their survival techniques during this phase. This study focuses on public listed companies in Malaysia, thus the model adopted is tailored to suit the given context.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.emeraldinsight.com/journals.htm?issn=0307-4358&volume=37&issue=6&articleid=1926010&show=abstract
Download Restriction: Cannot be freely downloaded

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Emerald Group Publishing in its journal Managerial Finance.

Volume (Year): 37 (2011)
Issue (Month): 6 (June)
Pages: 553-564

as in new window
Handle: RePEc:eme:mfipps:v:37:y:2011:i:6:p:553-564

Contact details of provider:
Web page: http://www.emeraldinsight.com

Order Information:
Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK
Email:
Web: http://www.emeraldinsight.com/mf.htm

Related research

Keywords: Business failures; Economic forecasting; Financial modelling; Malaysia;

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Edmister, Robert O., 1972. "An Empirical Test of Financial Ratio Analysis for Small Business Failure Prediction," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 7(02), pages 1477-1493, March.
  2. Altman, Edward I. & Haldeman, Robert G. & Narayanan, P., 1977. "ZETATM analysis A new model to identify bankruptcy risk of corporations," Journal of Banking & Finance, Elsevier, vol. 1(1), pages 29-54, June.
  3. Eisenbeis, Robert A, 1977. "Pitfalls in the Application of Discriminant Analysis in Business, Finance, and Economics," Journal of Finance, American Finance Association, vol. 32(3), pages 875-900, June.
  4. Izan, H. Y., 1984. "Corporate distress in Australia," Journal of Banking & Finance, Elsevier, vol. 8(2), pages 303-320, June.
  5. Andreas Charitou & Evi Neophytou & Chris Charalambous, 2004. "Predicting corporate failure: empirical evidence for the UK," European Accounting Review, Taylor & Francis Journals, vol. 13(3), pages 465-497.
  6. Laitinen, Erkki K. & Laitinen, Teija, 2000. "Bankruptcy prediction: Application of the Taylor's expansion in logistic regression," International Review of Financial Analysis, Elsevier, vol. 9(4), pages 327-349.
  7. Young-Won Her & Chongwoo Choe, 1999. "A Comparative Study of Australian and Korean Accounting Data in Business Failure Prediction Models," Working Papers 1999.07, School of Economics, La Trobe University.
  8. Westgaard, Sjur & van der Wijst, Nico, 2001. "Default probabilities in a corporate bank portfolio: A logistic model approach," European Journal of Operational Research, Elsevier, vol. 135(2), pages 338-349, December.
  9. Bongini, Paola & Ferri, Giovanni & Hahm, Hongjoo, 2000. "Corporate Bankruptcy in Korea: Only the Strong Survive?," The Financial Review, Eastern Finance Association, vol. 35(4), pages 31-50, November.
  10. repec:fth:latrob:99.07 is not listed on IDEAS
  11. Grice, John Stephen & Dugan, Michael T, 2001. " The Limitations of Bankruptcy Prediction Models: Some Cautions for the Researcher," Review of Quantitative Finance and Accounting, Springer, vol. 17(2), pages 151-66, September.
  12. Li-Chiu Chi & Tseng-Chung Tang, 2006. "Bankruptcy Prediction: Application of Logit Analysis in Export Credit Risks," Australian Journal of Management, Australian School of Business, vol. 31(1), pages 17-27, June.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eme:mfipps:v:37:y:2011:i:6:p:553-564. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Louise Lister).

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.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 profile, as there may be some citations waiting for confirmation.

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