A comparative model for financial distress in Malaysia's companies

• Published in: AIP Conference Proceedings
• Main Author: Ilias M.R.; Ishak S.S.; Nayan A.; Rahim A.H.A.
• Format: Conference paper
• Language: English
• Published: American Institute of Physics 2024
• Online Access: https://www.scopus.com/inward/record.uri?eid=2-s2.0-85202636242&doi=10.1063%2f5.0224793&partnerID=40&md5=3936549fdd1000c360bcef8e89a1b15a

The economic crisis has hit countries in Southeast Asia including Malaysia resulting in many companies experiencing financial crisis. Therefore, companies seize the opportunity to take preventive measures against financial crisis or bankruptcy. The use of different bankruptcy prediction models with different economic environments in the companies involved shows different results. In general, each model will give ideas for each company to make changes in business to avoid bankruptcy. The objective of this study is to evaluate the suitability of the bankruptcy prediction model and improve the effectiveness among the Practice Note 17 (PN17) and healthy companies that listed in Bursa Malaysia Stock Market with the Altman, Springate, Grover and Zmijerski model. The data of this study consists of 27 of PN17 companies and 155 of healthy companies are collected from 2017 to 2021. The models employ the logistic regression method using SPSS to predict multiple financial ratios simultaneously to assess a company's financial distress. The result show that 100% accuracy of the Grover model suggested method has an acceptable efficiency to predict financial distress followed by Altman, Springate and Zmijewski model. Meanwhile, the significant financial ratio variables are (current asset-current liability)/total assets (X1), sales income/ total assets (X5) and earnings before interest and tax (EBIT)/total assets (X6) for Altman and Springate model. While return on assets (ROA) and debt ratio (DR) for the Zmijewski model. © 2024 Author(s).