Monitoring mechanisms and financial distress of public listed companies in Malaysia
Vol. 10, No 1, 2017
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Soheil Kazemian
Universiti Teknologi MARA
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Monitoring mechanisms and financial distress of public listed companies in Malaysia
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Noor Azura Ahmad Shauri
Kolej universiti Poly-Tech MARA
Zuraidah Mohd Sanusi
Universiti Teknologi MARA Amrizah Kamaluddin
Universiti Teknologi MARA
Shuhaida Mohamed Shuhidan
Universiti Teknologi MARA
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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. |
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Received: November, 2016 1st Revision: February, 2017 Accepted: April, 2017 |
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DOI: 10.14254/2071-8330.2017/10-1/6
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JEL Classification: B26, G15, M21, P34 |
Keywords: corporate governance, financial ratios, financial distress, Malaysia, monitoring mechanism |
