Rationalities of Z-Category Shares In Dhaka Stock Exchange: Are They In Financial Distress Risk? (2025)

Financial Distress

2017

Bankruptcy Prediction by Using the Altman Z-score Model: An Investigation of the Pharmaceutical Industry in Bangladesh

Financial sustainability of a business is one of the prime concerns for both internal and external stakeholders. Internal stakeholders such as managers and employees might be interested in whether their efforts in the business add value and secure their job, while external stakeholders might be concerned directly with their Abstract Key Words: Whether a company would survive in a highly competitive business environment depends upon some important factors, viz., (1) financial strengths at the inception of the business, (2) ability of the company to generate sufficient cash flows from its continuing operations, (3) company's access to capital markets, (4) investors' trust on the growth of the company, and (5) the company's financial solvency to face adverse situation. Eventually, as financial health of a company continues to decline, the solvency gauges automatically a warning light to the stakeholders. From this perspective, the current study aims to investigate the likelihood of financial distress of leading pharmaceutical companies in Bangladesh, listed under category " A " of Dhaka Stock Exchange (DSE). The study provides some valuable insights to the stakeholders about financial fundamentals of the selected firms in addition to the critical focus on their bankruptcy possibility. For bankruptcy prediction of the selected firms, the study has applied the widely accepted Altman Z-score model. The study has also performed a trend analysis of some important financial variables in order to assess the companies' financial health. The empirical analysis reveals some valuable findings. According to the values of Z-score, two firms (Square Pharmaceutical and IBN SINA Pharmaceutical Industry) are found financially sound having no bankruptcy possibility in near future, of which the former is found exceptionally out performer in the medicine industry. The values of Z-score and other financial trend analysis of the rest of the companies are found to be unsatisfactory and they have significant likelihood of facing financial distress in near future.Another important finding of the study is that market value of equity of most of the selected firms is not reflecting the respective companies. This may be a major concern to the general investors and other stakeholders as well. Bankruptcy, Z-score, Dhaka Stock Exchange (DSE), Financial Health.

ANALYSIS OF FINANCIAL DISTRESS WITH AN USING ALTMAN Z-SCORE METHODS ON BAKRIE GROUP COMPANIES LISTED IN BEI YEAR 2012 -2017

Measuring financial distress of non-bank financial institutions of Bangladesh using Altman’s Z-Score model

International Business Education Journal

Non-bank financial institutions (NBFIs) are recognized as the fundamental of a financial market as they complement the banking institutions. Since 1981, NBFIs have been playing a vital role in the economic growth of Bangladesh. Unfortunately, in the recent years most of the NBFIs have been found financially distressed. However, few NBFIs that were included in our sample claimed themselves as potential companies with sound financial performance though it was highly criticized. Therefore, the motivation for conducting this study is to examine the financial soundness of selected NBFIs using Altman’s Z score (1995). This study involved 20 NBFIs out of 23 Dhaka Stock Exchange (DSE) listed institutions, which were selected based on information availability by considering A, B and Z categories from 2014 to 2018 period. The secondary data were collected from the annual reports of the selected companies over the period. The findings are as follows: 95% of the 20 NBFIs were in distress zone d...

Distress Risk and Stock Returns in An Emerging Market

Research Journal of Finance and Accounting, 2013

The impact of financial distress risk on equity returns: A case study of non-financial firms of Pakistan Stock Exchange

This study aims to investigate the relationship of financial distress risk and the equity returns of financially distressed firms listed on Pakistan Stock Exchange (PSX). Several studies have suggested that firm distress risk factor could be behind the book-to-market and size effects. Fama and French three factor Model (1993) is used for examining the relationship among equity returns, financial distress risk, size and book-to-market equity ratio. Non-financial firms listed on PSX are taken from the time-period of 2010-2016. Ohlson's O-Score (1980) "bankruptcy prediction model" is used for the prediction of financial distress risk and forecasted the distress risk firms listed on PSX. The panel (unbalanced) data is used to get the empirical findings and showed that the financial distress risk and book-to-market equity effect are statistically insignificant to explain the stock returns of distress firms due to the inefficiency of market. However, size effect is significant in explaining the stock returns of distress firms. The study also reveals that it is important to predict financial distress risk with a better predictor in order to avoid the uncertainties in PSX.

Predicting Bankruptcy Using Z-Score and Z Double Prime (Z”): A Study of Pakistan Stock Exchange

Journal of Accounting and Finance in Emerging Economies

Due to the unprecedented happenings and dynamic conditions of international economic system, firms are always at the verge of bankruptcy no matter how sound they are, their sustainability is always in jeopardy. Besides, lenders are continuously raising red flags and giving consistent warnings about possible perils of corporate failure due to fragile economic conditions and increasing debt levels in both corporate and individual businesses these days. Hence there was an exigency to ‘develop indicators for monitoring long term progress and sustainability of companies. Thereof it would contribute in illustrating to business analysts, firm stakeholders about the relevance of embracing these active checks for predicting bankruptcy as a sustainable business practice. This created a bizarre cult to look into the matter seriously. For this there is no mantra, no clever feats, sure-fire quick strategies. Instead there are well-defined, simple, systematic and sophisticated models to assess su...

Determinants of Corporate Financial Distress: Case of Non-Financial Firms Listed in the Nairobi Securities Exchange

Research Journal of Finance and Accounting, 2014

K-score categorisation of JSE listed sectors under the financial distress continuum theory: A quantitative approach

Cogent Economics & Finance, 2020

Purpose: South Africa's perilous liquidation culture poses severe threats to its macroeconomic and social objectives. Grounded in the financial distress continuum theory, a framework influencing both investment decisions and early intervention signals for firms, this article scrutinized the financial health and stability of listed firms. Utilizing the De la Rey K-score model as a risk-based measure, the study aimed to promptly detect and address the repercussions of corporate failures. Design: Spanning six years with a final sample of 673 company-year observations, this study employed statistical methods including one-way ANOVA and OLS for analysis. Findings: The results unveiled a substantial decline in average K-scores from 2011 to 2016, highlighting the pervasive financial distress across industries. While the consumer services and consumer goods sectors maintained a healthy mean K-score throughout the investigation, the telecommunications and health care sectors lingered in a "grey" zone with notable inter-year variations in financial health. Contrarily, the industrial and technology sectors displayed signs of financial distress. The study also established a significantly positive relationship between the K-score and performance variables. Recommendations: The study advocates turnaround strategies for sectors in the "grey" zone, aiming to prevent regression into financial distress. Additionally, distressed sectors are urged to explore pre-insolvency proceedings outlined in the Companies Act (2008). Originality: Uniquely applying the K-score model as an early warning signal for financial distress, this study intertwines the model with the financial distress continuum theory. The findings hold crucial implications for policymakers, practitioners, and regulatory authorities, particularly those navigating the challenges of emerging economies

Corporate Financial Distress

Springer eBooks, 2018