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Factors determining Z-score and corporate failure in Malaysian companies

Author

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  • Nurul Izzaty Hasanah Azhar
  • Norziana Lokman
  • Md. Mahmudul Alam
  • Jamaliah Said

Abstract

Predicting the sustainability of a business is crucial to prevent financial losses among shareholders and investors. This study attempts to evaluate the Altman model for predicting corporate failure in distressed and non-distressed Malaysian companies based on the data of financially troubled companies which are classified as Practice Note 17 (PN17) and matching similar non-PN17 companies during the period 2013 to 2017. This study utilises panel ordinal and panel random effects regressions. Findings show that the liquidity, profitability, leverage, solvency, and efficiency ratios are negatively significantly associated with corporate failure and bankruptcy. The leverage ratio is determined to be the strongest indicator of bankruptcy, followed by profitability, liquidity, solvency, and efficiency ratios. The findings will help companies' management bodies implement suitable strategies to prevent further financial leakage, thereby ensuring continuous and sustainable return on investment and profits for investors and shareholders.

Suggested Citation

  • Nurul Izzaty Hasanah Azhar & Norziana Lokman & Md. Mahmudul Alam & Jamaliah Said, 2021. "Factors determining Z-score and corporate failure in Malaysian companies," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 21(3), pages 370-386.
    • Handle: RePEc:ids:ijecbr:v:21:y:2021:i:3:p:370-386
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    Cited by:

    1. Anamaria-Geanina MACOVEI & Aurel BURCIU, 2025. "Bankruptcy Risk Assessment Using An Improved Altman Model: A Case Study On Toyota Car Dealers In Romania," European Journal of Accounting, Finance & Business, "Stefan cel Mare" University of Suceava, Romania - Faculty of Economics and Public Administration, West University of Timisoara, Romania - Faculty of Economics and Business Administration, vol. 13(1), pages 85-96, February.
    2. Olabisi Michael Oyinlola & Oladosu Jimoh Balogun & Oyetayo Oyewale Folajin & Nafisat Toyosi Muhammed & Oladipo Oluwafolakemi Fasesin, 2025. "Survival Prediction of Nigerian Listed Agriculture Companies: The Use of Altman Z-Score Models," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 9(14), pages 746-759, March.
    3. Noor Idayu Ismail & Noral Hidayah Alwi & Erna Masfiza Mohamed Ramli, 2025. "Auditor Tenure, Audit Committee Independence, and Effect on Fraud Risk: Evidence from Malaysia," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 9(9), pages 7333-7344, September.
    4. Noor Idayu Ismail & Noral Hidayah Alwi & Erna Masfiza Mohamed Ramli, 2025. "Corporate Governance and Fraud Risk: Insights from Malaysian Listed Firms," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 9(15), pages 1225-1234, October.
    5. repec:bcp:journl:v:9:y:2025:i:10:p:6814-6823 is not listed on IDEAS

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