IDEAS home Printed from https://ideas.repec.org/a/aui/lassij/v5y2021i1p386-400id176.html
   My bibliography  Save this article

Post COVID-19 financial distress in Pakistan: Prediction of corporate defaults at Pakistan Stock Exchange

Author

Listed:
  • Khalid Mumtaz Khan
  • Naeem Ullah

Abstract

COVID-19 has slowed down the global economic activity. This slowdown is expected to turn into an economic recession, where firms are expected to experience financial distress leading to corporate defaults. Predicting such defaults is important to safeguard the stakeholders’ interest in the financial markets. This study has estimated the extent of financial distress among the firms listed at PSX and constituting KSE 30 index, by using Altman’s Z-Score. The score has been computed using the financial statements of year 2019-20, and on the proforma financial statements for year 2019-20 and 2020-21. These financial years are considered as pre and post COVID-19 closing dates respectively for the financial statements. The proforma financial statements have been drawn for financial year 2019-20 and 2020-21 using established accounting conventions of prudence, conservatism, substance over form, and foreseeable future. The results of Z-score in pre and post COVID-19 have been compared to assess the change in degree of financial distress among the selected firms. A significant increase in the degree of financial distress has been observed, which may lead to an increased number corporate default for the firms listed at PSX. The firms and corporate regulators need to curtail the rate of corporate defaults.

Suggested Citation

  • Khalid Mumtaz Khan & Naeem Ullah, 2021. "Post COVID-19 financial distress in Pakistan: Prediction of corporate defaults at Pakistan Stock Exchange," Liberal Arts and Social Sciences International Journal (LASSIJ), IDEA PUBLISHERS, vol. 5(1), pages 386-400.
    • Handle: RePEc:aui:lassij:v:5:y:2021:i:1:p:386-400:id:176
    as

    Download full text from publisher

    File URL: https://www.ideapublishers.org/index.php/lassij/article/view/176/171
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mumtaz Ahmed & Liviu Marian Matac & Naureen Maqbool & Asma Salman & Muthanna G. Abdul Razzaq & Lara Al-Haddad & Codruta Daniela Pavel, 2024. "Bubbles Identification in an Emerging Economy and Within Stock Markets of its Trading Partners: Evidence from a GSADF Approach," Annals of Financial Economics (AFE), World Scientific Publishing Co. Pte. Ltd., vol. 19(04), pages 1-27, December.
    2. Ahmad Yousaf & Ufaq Adeel & Muhammad Hanan Arshad, 2023. "The Spill-over Effects between Oil and Gas Marketing and Exploration Firms of Pakistan Stock Exchange (PSX) KSE-100 index: During the Times of COVID-19 and Russian-Ukraine War," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 12(4), pages 65-78.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    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:aui:lassij:v:5:y:2021:i:1:p:386-400:id:176. 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: Ashfaq U. Rehman (email available below). General contact details of provider: https://ideapublishers.org/index.php/lassij/ .

    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.