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JOURNAL OF INTERNATIONAL STUDIES


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ISSN: 2306-3483 (Online), 2071-8330 (Print)



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Monitoring mechanisms and financial distress of public listed companies in Malaysia

Vol. 10, No 1, 2017

 

Soheil Kazemian

 

Universiti Teknologi MARA
Malaysia
Soheilkazemian@salam.uitm.edu.my

 

 

Monitoring mechanisms and financial distress of public listed companies in Malaysia

 

Noor Azura Ahmad Shauri

 

Kolej universiti Poly-Tech MARA
Malaysia
zueraichi@yahoo.com

 

 

Zuraidah Mohd Sanusi

 

Universiti Teknologi MARA
Malaysia
zuraidahms@salam.uitm.edu.my


Amrizah Kamaluddin

 

Universiti Teknologi MARA
Malaysia
amrizah@salam.uitm.edu.my

 

Shuhaida Mohamed Shuhidan

 

Universiti Teknologi MARA
Malaysia
shuhaida6704@salam.uitm.edu.my

 

 

 

 

Abstract. This study examines the relationships between financial distress and financial ratio (liquidity, leverage, profitability, firm’s performance, and dividend) among public listed companies, using the Altman Z-Score to determine the financial distress levels among public listed companies in Malaysia. Five-year data has been collected (2010 to 2014) from the annual financial statements and from Data Stream of public listed companies in Malaysia. The findings indicate significant relationships between liquidity, leverage, profitability, firm’s performance, and dividend with the financial distress levels among the companies in question. This study also examines the interaction effects of financial ratios and the year after implementation of the Malaysian Code on Corporate Governance (MCCG) in 2012 on financial distress levels. The results suggest that only liquidity and firm’s performance have stronger effects on financial distress levels in two years after MCCG implementation. This indicates that after the implementation of the Code, liquidity and firms’ performance ratios had strong and significant effect on financial distress levels. Overall, this study could help investors, creditors as well as external regulators in monitoring companies from being classified as financially distressed companies.

 

Received: November, 2016

1st Revision: February, 2017

Accepted: April, 2017

 

DOI: 10.14254/2071-8330.2017/10-1/6

 

JEL Classification: B26, G15, M21, P34

Keywords: corporate governance, financial ratios, financial distress, Malaysia, monitoring mechanism