Predicting financial distress: Importance of accounting and firm-specific market variables for Pakistan’s listed firms
This study is intended to identify the predictors of financial distress for the Pakistani firms. Variables used are the financial ratios representing profitability, liquidity, leverage, and cash flows, as well as two important market factors which are size and idiosyncratic standard deviation of eac...
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Online Access: | http://dx.doi.org/10.1080/23322039.2018.1545739 |
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doaj-49770d921e1c4b8386df016002bbb0fc2021-02-18T13:53:25ZengTaylor & Francis GroupCogent Economics & Finance2332-20392018-01-016110.1080/23322039.2018.15457391545739Predicting financial distress: Importance of accounting and firm-specific market variables for Pakistan’s listed firmsHamid Waqas0Rohani Md-Rus1Universiti Utara MalaysiaUniversiti Utara MalaysiaThis study is intended to identify the predictors of financial distress for the Pakistani firms. Variables used are the financial ratios representing profitability, liquidity, leverage, and cash flows, as well as two important market factors which are size and idiosyncratic standard deviation of each firm’s stock returns (SIG). The sample consists of 290 firms stretching from 2007 to 2016 and logit regression is applied to predict financial distress. The findings reveal that profitability, liquidity, leverage, cash flow ratios, and firm size are significant, while SIG is insignificant in predicting financial distress. Results of the estimated logit model I, model II, and holdout model reveal that the models perform consistently. This study contributes to the literature by testing the market variables in relation to financial distress as these variables were ignored by the previous studies in Pakistan. Findings of this study are precise as the study covers a longer time horizon and a larger sample size.http://dx.doi.org/10.1080/23322039.2018.1545739financial distressbankruptcylogit regressionfinancial ratioscash flow ratiosmarket variablesemerging marketpakistan |
collection |
DOAJ |
language |
English |
format |
Article |
sources |
DOAJ |
author |
Hamid Waqas Rohani Md-Rus |
spellingShingle |
Hamid Waqas Rohani Md-Rus Predicting financial distress: Importance of accounting and firm-specific market variables for Pakistan’s listed firms Cogent Economics & Finance financial distress bankruptcy logit regression financial ratios cash flow ratios market variables emerging market pakistan |
author_facet |
Hamid Waqas Rohani Md-Rus |
author_sort |
Hamid Waqas |
title |
Predicting financial distress: Importance of accounting and firm-specific market variables for Pakistan’s listed firms |
title_short |
Predicting financial distress: Importance of accounting and firm-specific market variables for Pakistan’s listed firms |
title_full |
Predicting financial distress: Importance of accounting and firm-specific market variables for Pakistan’s listed firms |
title_fullStr |
Predicting financial distress: Importance of accounting and firm-specific market variables for Pakistan’s listed firms |
title_full_unstemmed |
Predicting financial distress: Importance of accounting and firm-specific market variables for Pakistan’s listed firms |
title_sort |
predicting financial distress: importance of accounting and firm-specific market variables for pakistan’s listed firms |
publisher |
Taylor & Francis Group |
series |
Cogent Economics & Finance |
issn |
2332-2039 |
publishDate |
2018-01-01 |
description |
This study is intended to identify the predictors of financial distress for the Pakistani firms. Variables used are the financial ratios representing profitability, liquidity, leverage, and cash flows, as well as two important market factors which are size and idiosyncratic standard deviation of each firm’s stock returns (SIG). The sample consists of 290 firms stretching from 2007 to 2016 and logit regression is applied to predict financial distress. The findings reveal that profitability, liquidity, leverage, cash flow ratios, and firm size are significant, while SIG is insignificant in predicting financial distress. Results of the estimated logit model I, model II, and holdout model reveal that the models perform consistently. This study contributes to the literature by testing the market variables in relation to financial distress as these variables were ignored by the previous studies in Pakistan. Findings of this study are precise as the study covers a longer time horizon and a larger sample size. |
topic |
financial distress bankruptcy logit regression financial ratios cash flow ratios market variables emerging market pakistan |
url |
http://dx.doi.org/10.1080/23322039.2018.1545739 |
work_keys_str_mv |
AT hamidwaqas predictingfinancialdistressimportanceofaccountingandfirmspecificmarketvariablesforpakistanslistedfirms AT rohanimdrus predictingfinancialdistressimportanceofaccountingandfirmspecificmarketvariablesforpakistanslistedfirms |
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