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

Author

Listed:
  • 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)

Abstract

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.

Suggested Citation

  • Steven Liew Woon Choy & Jayaraman Munusamy & Shankar Chelliah & Ally Mandari, 2011. "Effects of Financial Distress Condition on the Company Performance: A Malaysian Perspective," Review of Economics & Finance, Better Advances Press, Canada, vol. 1, pages 85-99, August.
  • Handle: RePEc:bap:journl:110407
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    References listed on IDEAS

    as
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    More about this item

    Keywords

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

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • M1 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration
    • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General

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