WHAT DRIVES FINANCIAL DISTRESS FOR PN4 AND PN17 LISTED FIRMS IN MALAYSIA?

Abstract

Research on financial distress has attracted growing attention in the recent past. Enormous corporate failures in history have pointed to the need for deepened research on financial distress. This study attempts to predict the financial distress of listed firms in the Malaysian Stock Market by using firms’ financial ratios. Using Logit Regression Analysis, this study analysed a sample from Malaysian public listed firms from the year 2000 to 2018 to predict the probability of financial distress events. It showed that financial distress such as total assets turnover, earnings before interest and tax to sales, debt ratio, and shareholder’s fund to total debt were found to be significant in predicting financial distress. Based on the confusion matrix approach the developed model showed high accuracy in predicting financial distress since it could predict most of the cases within the sample correctly.