Working Capital Management and Firm Performance

This study examines the relationship between working capital management and firm’s performance in Pakistan. Data used in this study is based on 199 non-financial listed firms for 2006-2016. This study uses three proxies to measure the working capital management, namely, ICP, ACP and APP. To fill the gap in existing literature, this study uses both accounting-based (ROA) and market based (Tobins’ Q) measures of firm performance. According to the results, ICP, ACP and APP negatively influence the ROA while ICP and APP positively and ACP negatively influence the Tobins’Q. The relationships remain same when two controls firm age and firm size are added into model. The results of this study are useful for the financial managers of firms in Pakistan and other developing countries

An empirical investigation of failing companies and their determinants using the hazard model in an emerging capital market

The purpose of this study is to highlight the predictors of financial distress during the period 1990 to 2000. Previous studies highlight the inadequacies of the MDA and the log it models and suggest that a hazard model gives a more accurate result due to its consideration of time varying co-variates. By applying the hazard model, we find that leverage, profit, cash flow, liquidity, size and growth play a significant role in explaining financial distress with 83% accuracy rate. This rate did not change much when the model is applied to the hold-out sample. We also find that multicollinearity problem is not a threat in our analysis

The Role of Board Structure in Predicting Financial Distress in Malaysia

The aim of this study is to examine the impact of board characteristics on financial distress companies.Specifically this study examines board attributes (size of board, percentage of inside directors, CEO is founder, CEO is chairman and CEO duality) and its relation with companies that experienced financial distress after controlling for leverage, market return, lagged of market return, and GDP growth.Compared with previous studies in Malaysia, this study uses PN17 criterion to select the sample and that is defines as the shareholder’s equity is less than 25% of issued and paid-up capital of a firm.Using a data from 2004 to 2009, the results show size and CEO-founder are negatively significantly related to distress while CEO duality and fraction of independent director affect distress positively. This study could be used to measure the effectiveness of The Malaysian Code on Corporate Governance (MCCG).This study is also useful to directors, investors and authorities who would want to know which corporate governance factors explain distress

An Empirical Investigation on the Relationship between Risk of Bankruptcy and Stock Return

The main objective of the paper is to find out whether bankruptcy risk is a systematic risk. In particular, we investigate the contribution of size, bookto-market, excess market returns and bankruptcy probability in explaining returns. We allocate stocks into portfolios according to the probability of bankruptcy from the hazard model. Results show that bankruptcy risk is not a systematic risk. The results consistently show that excess market returns and size have strong power to explain returns in the UK for the period from 1988 to 1997. Book-to-market and bankruptcy risk only matt er in portfolios with higher probability of bankruptcy.   Keyword: Bankruptcy risk, bankruptcy probability, hazard model. JEL Classification: G12, G3

Predicting financial distress: Applicability of O-score and logit model for Pakistani firms

Predicting financial distress have significant importance in corporate finance as it serves as an effective early warning system for the related stakeholders.The study applies the most admired financial distress prediction O-score model and compares its predictive accuracy with estimated logit model. The study estimates logit model by including the profitability ratios, liquidity ratios, leverage ratios, and cash flow ratios. This study filled the gap by using the cash flow ratios to predict financial distress for Pakistani listed firms. The sample for the estimation model consists of 290 firms with 45 distressed and 245 healthy firms for the period 2006-2016 and covers all sectors of Pakistan Stock Exchange. The study provides important insights on the role of different financial ratio in predicting financial distress and shows that estimated logit model produces higher accuracy rate in predicting financial distress

The determinants of credit risk in Malaysia

Although Enterprise-Wide Risk Management (EWRM) concept is still new in many parts of Asia, there are positive indications that EWRM is beginning to receive attention.As a matter of fact, this topic is being widely discussed on an industry-wide basis.The emergence of EWRM is cited to be driven most by corporate governance, and its effective implementation is claimed to contribute towards value creation.This paper thus examined the drivers and the success of EWRM implementation with corporate governance compliance and value creation in for-profit companies.A survey found that EWRM concepts and its efforts have become a growing concern among Public Listed Companies (PLCs).The motivation factor of corporate governance is evidenced especially in non financial companies.Whilst financial companies cited that their EWRM practices were not only being driven by corporate governance compliance, but also for good business practice and improved decision making.In addition the motives of its implementation ensured the survival of the company and value creation

Technical and scale efficiency of automobile firms in Pakistan

The current study aimed at exploring the efficiency level of automobile firms in Pakistan.For this purpose, the current study has collected the data of 18 automobile and automobile parts firms from the year 2011 to the year 2015.To analyse the date, the current study has used the data envelopment analysis. Three models were used to calculate the firm efficiency such as constant return to scale, variable return to scale and scale efficiency.The results of the study have revealed that most of the automobile firms are not efficient during these years. In addition, the results were consistent based on the three efficiency models

Are we doing fine? A case Of Malaysian Airline System Berhad

Amir, an independent financial consultant, just came out from a meeting with the major shareholders. In the meeting on 7th January 2013, the shareholders raised a concern relating to their investment in the Malaysian Airline System Berhad (MAS). After two business turnaround plans, they wondered whether it was worth to continue holding their investment in MAS because it seemed that the business turnaround plans worked only in the short rather than long run. Moreover, information from the 2006 to 2012 annual reports did not suggest a healthier performance of MAS. They did not understand if the losses were caused by operating, financial or both leverages. Furthermore, the profit and loss statements showed a downward trend which raised concern on the sustainability of MAS in the long run. Although MAS had its own team to look at this matter, the major shareholders would like to have an independent assessment by an individual not related to MAS. Hence, Amir was consulted to provide a report on the liquidity, leverage and profitability analysis, as well as the business turnaround plans of MAS from the period 2006 to 2012. The analysis must be presented in the next meeting, which is scheduled on 14th January, 2013

Ownership Structure And Bank Performance During Economic Crisis In Indonesia

Indonesia had the economic and political crisis in mid-1997 through 1999. This crisis resulted in bank performance down even a loss. The banks are also experiencing financial hardship issues, loan loss and the threat bangkrup. A unique characteristic of Indonesian banking system is the existence of regional development banks (Bank Pembangunan Daerah), which is owned by local governments. This study examines the performance of this type of banks compared to private between regional development banks and federal government banks. Also this study examines the factors influence of bank performance. Measurement bank performance are Return On Assets (ROA) and Return On Equity (ROE). The sample of this study consists of 15 community development banks, 56 private banks, and 3 central government banks from 1997 to 1999. Using panel data methodologies, we find that community development banks and federal government banks perform at least as good as the private banks. Dummy equity, economic growth, equity ratio, loan ratio, cost ratio and total assets influence bank performance during economic crisis in Indonesia

Efficiency in SME: Malaysian evidence

Most studies on SMEs in Malaysia have looked at the performance of SMEs, especially by using the qualitative method.However, this study is different from previous studies where it offers a new insight of SMEs by looking at the efficiency of SME.Using 40 companies as the sample, this study analyse whether SME companies have used their current assets efficiently in getting sales.Surprisingly, the results show that most companies are not efficient in managing their current assets to produce sales. Since current asset or working capital is very crucial in running a business, the results might offer an insight of why most SMEs failed in their business