THE IMPACT OF COVID-19 ON THE FINANCIAL PERFORMANCE OF PN17 AND GN3 STATUS FIRMS: DOES IT ADD SALT INTO THE WOUND?

Abstract

The Covid-19 pandemic has brought about major changes to the Malaysian economic landscape in terms of productivity level, investment, and household spending. Nonetheless, the unprecedented presence of Covid-19 has caused an unexpected level of disruption to firms from a liquidity and leverage perspective that impacts financial performance. This study focused on financially distressed firms classified under PN17 and GN3 by Bursa Malaysia. Hence, the aim of this study is to examine the impact of liquidity, leverage, and the Covid-19 pandemic period on the financial performance of financially distressed firms in Malaysia which are classified as PN17 and GN3 firms. By using liquidity ratios, financial leverage ratios, and a dummy variable of Covid-19, the result showed that the current ratio, net working capital, and debt ratio were found significant to affect the financial performance. Meanwhile, there is no significant evidence to support that the Covid-19 pandemic has an impact on the performance of financially distressed firms. The finding indicates that the financially distressed firm’s financial performance was purely due to bad management practices, and not contributed by the Covid-19 pandemic.