Distress Of Companies Research Articles

Corporate sustainability reporting and financial performance of likelihood distress companies in Nigeria

This study explored the interplay between corporate sustainability reporting and the financial performance of likelihood distressed listed companies in Nigeria. This study employed an ex-post facto research design spanning a longitudinal period of five years (2018–2022). The sample size comprises one hundred and nineteen firms listed on the Nigerian Exchange Group (NGX), formally known as the Nigeria Stock Exchange (NSE). The study data were analysed using the random effect panel regression technique based on the outcome of the Hausman selection test. The study’s result indicated that both corporate social responsibility and economic performance exhibited a significant and positive relationship with the performance of the likelihood distressed companies implying an increase in corporate financial performance based on data extracted from the audited annual reports of the sampled firm. Surprisingly, environmental performance reporting demonstrated a negative and non-significant relationship with financial performance. Corporate governance practice displayed a positive but non-significant relationship with financial performance. Therefore, this study recommends that the management of the sampled companies should improve social responsibility and economic disclosures as they positively affect corporate financial performance. It is also recommended that companies disclose only material information especially concerning environmental sustainability performance to improve corporate financial performance.

Statutory principles governing director conduct when a company is in financial distress – a Trans-Tasman comparison

ABSTRACT The spotlight has recently been shone on the statutory duties of directors of companies in financial distress in Australia and New Zealand. In Australia, the 2023 Report on Corporate Insolvency noted concerns about the efficacy of the Australian insolvent trading regime and mooted the possibility of Australia adopting the United Kingdom ‘wrongful trading’ standard. In August 2023 the New Zealand Supreme Court delivered a much-anticipated judgment in Yan v Mainzeal Property and Construction Limited (in liq) focusing on the equivalent reckless trading duties, prompting the question of whether the New Zealand approach may offer useful insights for Australia and the United Kingdom. This paper provides a comparative analysis of the ‘insolvent trading’ provision in Australia, the ‘wrongful trading’ provision in the United Kingdom, and the ‘reckless trading’ provisions in New Zealand, considering these provisions against the backdrop of related statutory provisions and broader policy considerations and objectives.

A New Pre-Incorporation Roadmap to Support the Reduction of Insolvency Numbers?

There is a plethora of sources in England and Wales governing corporate insolvencies for directors of limited companies in financial distress or approaching or entering the insolvency process, together presenting to the company director a legislative framework lacking in coherence. There is also a lack of consistency in common law judgments, resulting in a lack of certainty for a director facing potential ruin if held personally liable.None of these factors support the UK government’s claimed rescue culture, which statistics show is failing. This is of increasing importance: the Covid-19 pandemic has already resulted in a wealth of companies in financial distress in a wide range of sectors.Access to limited liability is not a right, it is a benefit, one that can adversely impact on creditors when companies are struggling; it is only right that the obligations that come with enjoying that access are clearly defined, governed and managed. The authors present an alternative pre-incorporation roadmap for legislators and directors, aimed both at supporting the government’s rescue culture and leaving entrepreneurs free to leverage their knowledge to maximise shareholder returns, rather than worrying about safeguarding their own positions in relation to directorial duties and obligations during periods of financial distress.

Private Equity in Distress and the Incentives of Collateralised Loan Obligations

Abstract This article explores the problem that both modern private equity (PE) firms, and collateralised loan obligation (CLO) lenders to PE portfolio companies, have incentives to avoid a formal restructuring of PE portfolio companies in financial distress. The author is concerned that this may lead to negative social costs for suppliers, employees, customers and even government agencies. She explores how and why the problem arises, and the ways in which corporate and corporate insolvency law might be able to respond to it. Some suggestions are made, but it is accepted that any solution involves a sensitive balance that needs to be approached with considerable care.

Kmeans-SMOTE Integration for Handling Imbalance Data in Classifying Financial Distress Companies using SVM and Naïve Bayes

Imbalanced data presents significant challenges in machine learning, leading to biased classification outcomes that favor the majority class. This issue is especially pronounced in the classification of financial distress, where data imbalance is common due to the scarcity of such instances in real-world datasets. This study aims to mitigate data imbalance in financial distress companies using the Kmeans-SMOTE method by combining Kmeans clustering and the synthetic minority oversampling technique (SMOTE). Various classification approaches, including Nave Bayes and support vector machine (SVM), are implemented on a Kaggle financial distress data set to evaluate the effectiveness of Kmeans-SMOTE. Experimental results show that SVM outperforms Nave Bayes with impressive accuracy (99.1%), f1-score (99.1%), area under precision recall (AUPRC) (99.1%), and geometric mean (Gmean) (98.1%). On the basis of these results, Kmeans-SMOTE can balance the data effectively, leading to a quite significant improvement in performance.

Restructuring, Winding-Up & Portfolio Transfer of Insurance Companies in Distress

Restructuring, Winding-Up & Portfolio Transfer of Insurance Companies in Distress

Application of Z–Score and Z-3 Score Models to Evaluate the Financial Situation of the Modern Sewing Company: A Case Study

The purpose of this research work is to examine the financial position of the company studied using Altman’s Z-score and Z-3 score models. We are interested in identifying the financial position of the Modern Sewing Company (MSC) working in Iraq. The study focused on the importance, causes, symptoms of financial failure and distress. When the question deals with the potential effects on the wealth of creditors, stockholders, and society as a whole, researchers consider a company's distress and bankruptcy to be the most important issue to be studied. The Altman Z-score and Altman Z-3 Score models were applied on the financial data of the MSC to investigate and to predict the financial position of MSC between 2016 - 2022. The analysis conducted in this research work was based on the secondary extracted data From the financial statement of the company available on the listed companies at the Iraqi Securities Commission (isc.org.iq). According to the Altman Z-Score the MSC faced financial failure in 2016 and 2020, while according to Altman Z-3 score it was far away from financial failure during 2016-2022. This research is important because it provides investors and the MSC with information to guide their investments. The value and importance of research related to the study of financial failure prediction models in the industrial sector in Iraqi are somewhat rare and requires more deep analysis due to the uncertainty in the Iraqi economy. The financial research also seeks to explain failure models and the extent to which investors benefit from these models.:

Value Creation after Chinese Firms Acquire Financially Distressed Overseas Firms: Viva’s Acquisition of Clarks Group

Purpose - In recent years, overseas mergers and acquisitions have become a crucial means for many enterprises to enter foreign markets, achieve diversification of corporate brands, expand business scope, increase transaction amounts, and rapidly scale corporate operations. This study aims to investigate value creation by acquirers and potential influencing factors to determine whether companies facing financial difficulties through overseas mergers can generate effective value.
 Design/Methodology/Approach - This study examines post-acquisition value creation by companies through literature review and analysis of financial data from the last three years. It adopts a case study approach, focusing on Viva Goods Company Limited’s acquisition of Clarks in the UK under LionRock. The goal is to explore value creation and influencing factors in this specific context.
 Findings - The study reveals that the issues of target companies in financial distress are concentrated on working capital, while historical advantages and market value do not decline synchronously. Therefore, when facing distressed target companies, the acquiring party can not only revitalize the target company through capital injection to quickly restore operational status, expand market share, and form new competitive strength but also help its own company achieve short-term and long-term stock price increases, thereby gaining profits.
 Research Implications - This study explores factors in value creation, assessing target companies pre-merger, and analyzing post-merger integration for value growth. It focuses on risks and value in financially distressed target companies, aiding enterprises in acquiring distressed overseas firms, serving as a market research case for multinational corporate mergers.

Recovering Value in Distressed Companies: A Case Study of Tuban Petrochemical Industries and its Subsidiaries

This study aims to investigate the restructuring process of PT Tuban Petrochemical Industries (Tuban Petro) and its subsidiaries, formerly owned by the ex-National Bank Restructuring Agency (IBRA). The study also seeks to examine strategic initiatives aimed at increasing competitiveness and effecting leadership, organizational and stakeholder changes to achieve value recovery. This qualitative study employs an explanatory case study approach. Data were collected through unstructured interviews and archival studies. The market multiples approach was used to measure the estimated stock value. The results indicate that the turnaround strategies and efforts successfully unlocked value during the distressing conditions. Strategies for restoring competitiveness, changing leadership and organization, and gaining stakeholder support were crucial for achieving value recovery. In distressed companies, shareholders, suppliers, distributors, and creditors play a significant role in restoring competitiveness and driving changes in leadership and organization. The estimated value recovery shows that the turnaround was implemented through a strategy with costs and a long value recovery time. This study fills a gap in the literature as few studies have examined the restructuring of ex-IBRA assets due to limited access to comprehensive information. The findings provide an alternative evaluation of the restructuring process and the strategies implemented, which can inform future strategies for similar distressed companies facing crises.

Analisis Financial Distress pada Perusahaan Konstruksi selama PSBB-PPKM era COVID-19 di Indonesia

Purpose: The purpose of this study is to analyze the extent of financial distress experienced by construction companies during the implementation of the PSBB-PPKM policy in the COVID-19 era during 2020-2022. Methodology/approach: This research methodology uses descriptive statistical analysis and review studies in a quantitative approach. The data used is secondary data sourced from the financial statements of construction companies that have been listed on the Indonesia Stock Exchange, then processed and analyzed using the Microsoft Excel application. Result/findings: During the implementation of the PSBB-PPKM policy, there were 31 samples of construction companies detected as financial distress, 12 and 20 samples of companies detected as grey area and safe zone. Financial distress companies occur because they have poor profitability ratios and the largest solvency ratios among other groups, gray area companies occur because they have large solvency ratios and poor profitability ratios, and safe zone companies occur because they have high liquidity and profitability ratios, and the smallest solvency ratios among other group companies. Limitation: The limitations of this study are the lack of consistent research analysis directions in previous journals, and not all sample company financial statements provide specific explanations of the development of account items in their financial statements. Contribution: This research can contribute as one of the main references of stakeholders to make decisions that can avoid losses in the current financial situation of construction companies in Indonesia in the future.

Analisis Perbedaan Tingkat Kebangkrutan Menggunakan Metode Altman Z-Score dan S-Score Springate pada Perusahaan Pariwisata Sebelum dan Selama Pandemi Covid-19

The purpose of this study is to determine the difference in bankruptcy rates in tourism companies before and during the Covid-19 pandemic.The results showed that there were different results in predicting bankruptcy before and after the pandemic. The results of this study indicate the potential for financial distress using Altman's Z"-Score method that in 2018 there were 11 companies experiencing financial distress, 2 companies in the gray area, and 2 non-financial distress companies. In 2019 there were 10 companies experiencing financial distress, 3 companies in the gray area, and 2 non-financial distress companies. In 2020 there are 8 companies experiencing8 companies experiencing the gray area and 4 non-financial distress companies. In 2021 there are 10 companies experiencing financial distress, 1 company in the gray area, and 4 non-financial distress companies. Potential financial distress using the Springate S-Score method that in 2018 there were 11 companies experiencing financial distress and 4 non-financial distress companies. In 2019 there were 11 companies experiencing financial distress and 4 non-financial distress companies. In 2020 14 companies were experiencing financial distress, and 1 was in the non-financial distress category. In 2021 there are 15 companies experiencing financial distress and no companies in the non-financial distress category. This potential financial distress is a signal of self-quality that the company informs external parties which is useful in making future decisions.

Appropriately Managing Knowledge in Romanian Entrepreneurial Businesses: Finding Balance in Restructuring Companies

In light of the global economy transformation and the several crises affecting the world, streamlining and reorganization of companies' activities is a priority. We posit that concentration of knowledge and its use in companies for short term gains can lead to misguided economic behavior, crisis and insolvencies coupled with low probability of successful restructuring. In turn the success of restructuring is dependent on cohesive knowledge management while dispersed knowledge management can, at most, prolong the economic life of a company and not save it from demise. We analyze the impact and lack of impact that knowledge and its guided/misguided management can have on Romanian companies, ex ante and ex post insolvency procedures. We chose both an exploratory and explanatory case study approach of Romanian companies affected by economic crisis that underwent various insolvency stages, tracing the use of knowledge and its different practical deployment to the decision-making processes and their outcomes. We review the causes that lead to the economic crisis and subsequent insolvency contexts. We compare the use of knowledge by the companies’ leadership against similar cases in other jurisdictions and we identify patterns of successful and unsuccessful application of knowledge management. Next, we investigate the effects of dispersed knowledge management in the early insolvency stages, focusing on the reorganization phase identifying gaps and discussing potential solutions. The results suggest, as they apply to the researched case studies, that both concentrated and dispersed knowledge management within distressed companies do not lead to positive outcomes and a balanced approach to knowledge management is more prone to provide effective and viable restructuring. The article explores several knowledge management theories and various academic research as they relate to the decision-making process for Romanian companies in distress and expands the academic universe as it relates to knowledge treatment in economic crisis. The results of our research and the potential solutions discussed can be further developed into a best practice guidance or a practical model to be used both by academics and practitioners as well.

Good Corporate Governance Dan Financial Distress Pada Perusahaan Manufaktur Di Indonesia

Good Corporate Governance is important for companies to overcome financial difficulties. This study intends to analyze good corporate governance and its influence on predicting the condition of companies in financial distress. Good corporate governance is proxied by institutional ownership, managerial ownership, directors, the board of commissioners, and the audit committee. By using logistic regression for 21 manufacturing companies from 2015 to 2019, it was found that the board of directors and audit committee had a negative effect on financial distress. The board of commissioners has a positive effect on financial distress. The other variables, namely institutional and managerial ownership, have no effect on financial distress. To avoid financial distress in manufacturing companies, it is necessary to have a large board of directors and an audit committee, but not a board of commissioners. The fewer the boards of commissioners, the easier it will be for companies to control financial conditions to avoid financial distress.

ANALYSIS OF FINANCIAL DISTRESS IN BROADCASTING SUB-SECTOR COMPANIES LISTED ON THE INDONESIA STOCK EXCHANGE

Financial distress, also known as financial difficulties, refers to a situation in which a company experiences unhealthy financial conditions or a crisis. It typically starts with increasing liquidity pressure and continues with a decrease in the value of company assets, ultimately leading to bankruptcy. Bankruptcy poses a significant risk for companies; however, this risk can be minimized or prevented through the use of bankruptcy detection models or tools. The purpose of this study was to assess the financial distress of companies in the Broadcasting Sub-Sector listed on the Indonesia Stock Exchange during the period of 2017-2021. The Springate, Zmijewski, and Grover models were employed for this analysis. The study's population comprised companies in the Broadcasting Sub-Sector listed on the Indonesia Stock Exchange during the specified period, amounting to 5 companies. A research sample of 4 companies was selected using a purposive sampling technique. The findings indicate that according to the Springate model, two companies, namely PT. MDIA Tbk with a rate of 80% and PT. VIVA Tbk with a level of 100%, were in a state of financial distress. The Zmijewski model identified PT VIVA Tbk as the only company in financial distress with a level of 80%. Additionally, based on the Grover model, PT. VIVA Tbk exhibited a financial distress level of 40%.

When and Why Are Consumers Willing To Help For-Profit Companies in Distress?

When and Why Are Consumers Willing To Help For-Profit Companies in Distress?

Analyzing financial distress in the Indonesian Tourism Sector: A case study during the COVID-19 Pandemic

Financial distress is a state of financial difficulty before the company finally experiences bankruptcy. The Covid-19 pandemic has had a significant negative impact on the financial state of various businesses in the Indonesian tourism industry. To prevent bankruptcy from occurring, it is important to assess the financial situation of affected companies to estimate financial distress. This research aims to analyze the effect of Return on Assets, Current Ratio and Debt to Total Asset Ratio on financial distress conditions in tourism sub-sector service companies listed on the Indonesia Stock Exchange for the 2019-2022 period. The population in this research were all tourism sub-sector service companies listed on the Indonesia Stock Exchange that published their financial reports in 2019-2022. The sample was searched by purposive sampling and there were 32 companies and obtained 128 observation data consisting of 112 samples of financial distress companies and 16 samples of non-financial distress companies. Financial distress criteria are measured by interest coverage ratio. The statistical analysis used in this research is logistic regression. The results of this research indicate that partially Return on Assets and Debt to Total Asset Ratio affect Financial Distress, while Current Ratio has no effect on Financial Distress. Simultaneously Return on Assets, Current Ratio, and Debt to Total Asset Ratio affect Financial Distress.

Prediction Analysis of Company Bangkruptcy Using Comparison of the Altman Method (Z-score) and Grover Method (G-scrore) as an Early Warning System in Pharmaceutical Subsector Companies

Pharmaceutical companies are part of the manufacturing sub-sector of the health sector, at the end of 2019 the outbreak of the Covid-19 virus weakened the country's economic sector, so this was also felt by pharmaceutical companies. The outbreak of the Covid-19 virus has created high market demand for medicines and medical devices, this has increased raw materials because 90% of pharmaceutical raw materials in Indonesia are still imported, as a result, if company management does not act immediately, this will lead to bankruptcy. The research objective is to predict the bankruptcy of pharmaceutical companies listed on the Indonesia Stock Exchange in 2019-2021 by using a comparison of the Altman method (Z-Score) and the Grover method (G-Score). Using a type of quantitative research using secondary data from the annual financial reports of pharmaceutical companies listed on the Indonesia Stock Exchange for 2019-2021. The data collection technique uses a saturated sample technique using data analysis, namely the Altman method (Z-Score) and the Grover method (G-Score). The results show that from the annual calculations using the Altman method, there are 6 companies in healthy condition and 3 companies in distress and gray areas, while the Grover method calculates that all companies, namely 9 companies, are declared to be in financially healthy condition with 27 samples of data for 2019-2021. In calculating the level of accuracy, the Altman method obtains an accuracy of 77.7%, while the Grover method obtains an accuracy of 100% by looking at the number of correct predictions and the entire sample.

Using Altman and Sherrod Z- Score Models to Detect Financial Failure for the Banks Listed on the Iraqi Stock Exchange (ISE) Between 2009 – 2013

Purpose: The Purpose of the study was to examine the validity of the Altman Z- Score and Sherrod Z- Score models in financial failure prediction. To achieve the study's goal, references from various authors who have reviewed this topic were used. Theoretical framework: The study highlights the importance of analyzing and delving into the various notions of financial failure and distress. When it comes to potential effects on the wealth of creditors, stockholders, and society as a whole, academics and researchers consider a company's distress and bankruptcy to be the most important issue to be studied. In order to maintain the goal of company survival and continuity before the disaster happens, many academics started looking for a method to identify and forecast distress and failure. Design/methodology/approach: Altman Z-score and Sherrod Z- score employed a multi-discriminant model to predict the financial position of ten ISE banks between 2009 - 2013. Z- Score models from Altman and Sherrod were used to determine whether the banks listed on the ISE are exposed to failing financially. Ten banks out of the forty - six banks listed on the ISE were selected. The study only used secondary data obtained from the chosen banks' financial statements in ISE. Findings: Based on Altman's Z- score model, the study examines that certain banks are particularly exposed to failure. In contrast, the Sherrod Z- Score model indicates that the chosen banks have some issues, but they are minor, and the risk of bankruptcy is low. Research, scientific and social implications: By using a failure prediction model, it is possible to determine the likelihood that banks will experience financial failure in the future. Investors could use this information to guide their decision-making going forward. Originality/value: The value and importance of research related to the study of financial failure prediction models in Iraqi commercial banks. The research also seeks to explain financial failure models and the extent to which investors benefit from these models.

Financial distress and accrual and real earnings management in Polish public companies

Purpose: The study aims to assess differences in accrual and real earnings management strategies between financially distressed and non-distressed companies. The research sample includes public non-financial companies in Poland.Methodology/approach: Based on the GICS classification, cross-sectional regressions were estimated. Abnormal accruals were calculated using the Jones model and the modified Jones model. Based on Roychowdhury, real earnings management was proxied: abnormal operating cash flow, abnormal production costs, and abnormal discretionary expenses. Symptoms of financial difficulties were observed with discriminant analysis, net working capital strategy and ability to pay interest. Parametric and non-parametric statistical tests were used.Findings: There were statistically significant differences in earnings management between non-distressed and distressed companies. Financially healthy companies, as well as those with conservative net working capital strategies and a good ability to pay their interest, were more likely to manage earnings. However, they used selected to influence through real transactions.Research limitations/implications: Proxies for earnings management and financial difficulties are commonly recognized in the literature, but none of them is without imperfections. Therefore, many alternative research approaches have been used.Originality/value: Previous Polish research has not addressed the relationship be-tween earnings quality and financial distress. Multiple robustness tests were imple-mented.

Analysis of Cross-industry M&A in the New Energy Era: a Case Study of Dexin Transport

Under the strategic vision of green economy and the goal of carbon peaking and carbon neutrality, China's new energy industry has entered a new stage of high-quality development. Meanwhile, the scale of M&A of Chinese enterprises began to increase rapidly after 2007 as more and more enterprises explore diversification strategy and seek business transformation. In this context, this paper explores the motivations and performance of enterprises' cross-industry merger in the new energy era by studying the case of Dexin Transport's cross-industry merger with Zhihong Precision which realized its transformation to the new energy industry. This paper analyzes the status of related companies, the prospection of related industries and the companies’ financial situation to explore the motivation of cross-industry mergers. We also evaluate the performance of the merger from the perspective of short-term market effect, status of transformation, long-term market performance and financial situation, and gives relevant investment suggestions. Based on the analysis, strategic transformation and cross-industry M&A are feasible choices for companies whose main businesses are limited in development and companies in financial distress. On the other hand, it is essential to be farsighted in the selection of the target industry. The development potential and market recognition of the target industry are the key to the improvement of the company's future performance and financial condition. These results present guiding significance for enterprises in similar circumstances and provides practical reference for enterprises with business transformation or upgrading plans and merger plans.