Companies In Financial Distress Research Articles

Does Financial Distress Contribute as an Intermediary Factor in Detecting Financial Statement Fraud ?

This study aims to investigate whether financial distress acts as an intermediary factor in detecting fraudulent financial statements in manufacturing companies listed on the Indonesia Stock Exchange. The purposive sampling method was used to select 105 manufacturing companies during the period 2017-2021. The analysis was conducted using the Outer Smart PLS model to evaluate the relationship between auditor turnover, board turnover, financial targets, ineffective supervision, capability, and financial distress on financial statement fraud. The results confirmed that there was no significant influence between capacity, board turnover, financial targets, ineffective supervision, and financial distress on financial statement fraud. In addition, financial distress also does not mediate the effect of other variables on financial statement fraud. This approach reflects the ethical philosophy in the study that emphasizes honesty, integrity, and transparency in corporate financial reporting. These results highlight the importance of effective supervisory strategies and strong internal controls in preventing and detecting financial statement fraud, regardless of the company's financial distress. This study contributes by exploring the role of financial distress in detecting financial statement fraud. For future research, it is important to investigate additional factors that influence fraud and develop more effective monitoring strategies. Contingency theory emphasizes the importance of contextual factors in organizational management, while Fraud theory pays attention to the motives and driving factors behind fraudulent behavior.

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

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

Predicting financial distress using current reports: A novel deep learning method based on user-response-guided attention

Effective financial distress prediction (FDP) can discover a company's potential financial risks and support relevant decisions in a timely manner. Previous studies on FDP have mostly focused on using financial indicators and periodic reports. Compared with periodic reports, current reports disclose major events in a timelier manner. But leveraging the information in current reports involves the critical challenges of capturing the complex semantics and measuring the importance of heterogeneous events. To this end, we propose a novel deep learning method, a user-response-guided deep attention network (URGDAN), to predict financial distress using current reports. In the proposed method, we construct a deep learning architecture to integrate financial indicators, current report texts, and user responses. URGDAN leverages the user responses to current reports to guide the semantic feature representation of the reports, it also identifies event information that has a significant correlation with company financial distress. Empirical evaluation shows that URGDAN significantly improves predictive performance and can accurately determine the importance of different current reports. Our work provides practical implications for creditors and investors.

Bargaining in the shadow of law and finance: the market-oriented debt to equity swap in China

ABSTRACT This article presents a comprehensive review of China's recent market-oriented Debt-to-Equity Swap (DES) programme, a strategy developed to alleviate financial distress in companies and reduce the country's overall debt. The effectiveness of the programme in China remains a subject of debate, with particular concerns about government interference. This study uncovers that, while China's DES transactions show signs of becoming more 'market-oriented', the evolution is hindered by the current legal and financial institutions. The findings of this study reinforce the 'law and finance' theory, emphasising the crucial function of sound legal systems in enabling private bargains and promoting financial development and economic growth. To facilitate truly market-oriented DES and efficient corporate restructuring, the study underscores the need for China to foster reforms in legal and financial institutions. Key recommendations include promoting fairness in formal reorganisation, developing a separate restructuring framework, and exploring effective valuation methods.

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.

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.

Determinants of financial distress in the building construction sub-sector companies listed on the Indonesia Stock Exchange

Purpose — This study aims to analyze the influence of profitability, leverage, and intellectual capital on financial distress in companies within the building construction sub-sector.Method — The research method involves quantitative and regression analysis. The sample consists of companies within the building construction sub-sector that consistently published financial reports during the period 2016-2021. The research population comprises 96 building construction companies listed on the Indonesia Stock Exchange, with 16 companies meeting the sample requirements. Data collection is performed using purposive sampling, and the analysis is conducted using EViews 10. Various tests, including classic assumption tests, feasibility analysis models, panel regression analysis, and coefficient of determination tests, are employed in the analysis.Result — The study results indicate a significant positive effect of profitability on the level of financial distress, suggesting that higher levels of profitability correspond to lower financial distress. Conversely, leverage demonstrates a significant negative effect on financial distress, implying that higher levels of leverage are associated with increased financial distress for the company. However, the study did not identify a significant relationship between intellectual capital and the level of financial distress, suggesting that the level of intellectual capital does not significantly influence the level of financial distress.Practical implications — Management in the building construction sub-sector is encouraged to prioritize strategies and tactics aimed at enhancing company profitability. Focusing on efforts to improve operational efficiency, optimize asset utilization, and enhance the effectiveness of marketing strategies can contribute to an increase in the company's profitability.

PENGARUH RETURN ON EQUITY, LEVERAGE, DAN LIKUIDITAS TERHADAP KESULITAN KEUANGAN

This study aims to determine the effect of return on equity, leverage and liquidity on financial distress in non-financial companies listed on the Indonesia Stock Exchange during 2017 -2020. The sample was selected using the purposive sampling method and the valid data were 62 companies. The data processing technique used multiple regression analysis assisted by EViews 12 for windows released 2020 and Microsoft Excel 2016. The results of this study indicate that liquidity has a significant effect on the company's financial distress, while return on equity and leverage have no effect on corporate financial distress. The implications of this research are the need for processing the company's current assets properly to be able to reduce the risk of experiencing financial distress.

CEO Overconfidence as Moderator of Sales Growth, Interest Coverage, Fixed Asset Intensity to Financial Distress

This study seeks to explore the influence of certain factors, namely company growth, interest coverage ratio, and fixed asset intensity, on a company's financial health or distress. We pay special attention to the potential role of CEO overconfidence as a variable that might change or moderate these influences. Drawing from a quantitative approach, we used publicly available financial statements of primary consumer goods companies listed on the Indonesia Stock Exchange from 2017 to 2021. Our findings suggest that company growth and the value of fixed assets play roles in determining financial distress, but the interest coverage ratio does not. Moreover, when factoring in CEO overconfidence, we found it changes the way company growth and fixed assets relate to financial distress. Yet, this CEO trait doesn’t alter the relationship between the interest coverage ratio and financial distress.
 Keywords: company growth, interest coverage ratio, fixed asset intensity, ceo overconfidence, financial distress

Financial Distress Classification Using Feedforward Neural Network Based on Altman and Ohlson Financial Ratios

The ever-changing economy requires companies to anticipate future conditions in order to avoid financial distress, a continuous decline in financial conditions. The research focused on comparing Altman and Ohlson’s financial ratio in classifying financial distress on Property and Real Estate companies using the Feedforward Neural Network. The data used is the financial report data of 19 Property and Real Estate companies listed on the Indonesian Stock Exchange in 2016-2022, with the initial status of financial conditions based on earnings per share. (EPS). The study also used the Synthetic Minority Oversampling Technique (SMOTE) method to address class imbalances.  The best financial ratio is selected based on accuracy values and Area Under Curve (AUC). Altman’s financial ratio with the FFNN model architecture (5-2-1) with a balance of 60:40 yields an accuracy of 84.62% and an AUC of 0.8325. The Ohlson Financial ratio with the 60:40 data balancing process and the FFNN model architecture (9-4-1) yields an accuracy of 93.27% and an AUC of 0.9045. Thus, in predicting financial distress in companies in the Property and Real Estate sector, Ohlson’s financial ratio with the predictor variables Corporate Size (SIZE), Total Liabilities to Total Assets (TLTA), Working Capital to Total Acts (WCTA), Current Liability to Current Asset (CLCA), OENEG, Net Income to total assets (NITA), Cash Flows Operating to Total Responsibilities (CFOTL), Net Revenue (INTWO), and Net Incoming Change (CHIN) yielded the best results. This best ratio can be used as a consideration in using alternative financial ratio to classify financial distress.

Does GCG moderate the financial distress on tax avoidance?

This study aims to determine the effect of financial distress on tax avoidance, moderated by good corporate governance. This research was conducted on transportation and logistics sector companies listed on the Indonesia Stock Exchange in 2019–2021 because the Indonesian economy began to experience a contraction as a result of the COVID-19 Pandemic in 2019 and continued until 2021, therefore it has an impact on state tax revenues. The sample was selected using a purposive sampling technique, and 14 companies were identified. The data analysis technique used is moderation regression analysis. This study also uses factor analysis techniques to find the best factors to serve as proxies for corporate governance. The results of the study show that financial distress has a positive effect on tax avoidance. This study also found that good corporate governance which is proxied by an independent board of commissioners can weaken the effect of financial distress on tax avoidance. The increasing financial distress in companies, the practice of tax avoidance is also increasing. If the company implements good governance, the management will make less effort to tax avoidance. This is because the more the number of independent commissioners, the more effective it is in supervising the performance of managers.

CASH FLOW STATEMENT ANALYSIS: IDENTIFYING RED FLAGS AND WARNING SIGNS FOR FINANCIAL DISTRESS

This paper focuses on the importance of cash flow statement analysis in identifying red flags and warning signs for financial distress in companies. The cash flow statement provides valuable insights into a company's cash generation, liquidity, and financial health. By examining key components of the cash flow statement, such as operating cash flows, investing activities, and financing activities, analysts can identify patterns and indicators that may suggest potential financial distress. This paper discusses common red flags and warning signs to look out for during cash flow statement analysis and emphasizes the significance of early detection and proactive measures in mitigating financial distress.

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%.

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.

Financial Distress and the Commitment to Promoting Innovation in State-Owned Enterprises: A Critical Perspective

Financial distress in State-Owned Enterprises (SOEs) has been a problematic issue for a long time. By 2020, the total debt of SOEs in Indonesia reach 1.682 trillion Rupiahs, whereas 68% out of all SOEs that receive state capital injections are facing bankruptcy. However, a more critical perspective still needs to investigate how commitment to promoting innovation relates to financial distress in SOEs. The existing studies of financial distress in SOEs have mainly focused on analyzing technical and structural factors and the predictive models using company financial indicators. This study aims to analyze the financial distress and innovation in SOEs critically. This study uses official data of PT Krakatau Steel from 2015-2020 and employs the combined analysis method. Quantitative regression analysis analyzes the company's financial distress throughout the period. In contrast, qualitative content analysis analyzes the relevance of the company's innovation commitment in the same period. The study shows that apart from ineffective capital structure decisions, low commitment to innovation is an important factor influencing financial distress in SOEs. The prospect of restructuring as a short-term strategy is also discussed.

ANALYSIS OF FINANCIAL PERFORMANCE ON THE PREDICTION OF FINANCIAL DISTRESS IN THE INDONESIA STOCK EXCHANGE

This study aims to determine the effect of liquidity ratios, profitability ratios, economic profitability ratios and leverage ratios on the prediction of financial distress in the banking sector on the Indonesia Stock Exchange. This study uses a quantitative approach. The sample used is data on the banking sector that has gone public with a total of 10 banks for the 2020-2022 period. The analysis technique used in this study is the classical assumption test, multiple linear regression analysis of determination analysis and hypothesis testing with the T-Test and F-Test. The results of the study show that the Liquidity Ratio, Profitability Ratio, Earnings Ratio and Leverage Ratio affect the Prediction of Financial Distress of banking companies on the Indonesia Stock Exchange by 78.3% and the remaining 21.7% is influenced by other factors not examined in this study. The profitability ratio is the ratio that has the most dominant influence on the prediction of a company's Financial Distress

PENGARUH RASIO KEUANGAN TERHADAP FINANCIAL DISTRESS PADA SEKTOR PROPERTI, REAL ESTATE, DAN KONSTRUKSI

This research aims to determine the effect of profitability, liquidity, leverage, activity, and sales growth on financial distress. This research was quantitative research with logistic regression as a data analysis technique. The research samples were 61 companies from the Property, Real Estate, and Construction Sectors listed on IDX in the 2018-2020 periods which were selected using the purposive sampling method. The results showed that profitability, liquidity, and activity significantly affected financial distress. Meanwhile, leverage and sales growth had an insignificant effect on financial distress. Therefore, companies as well as investors and creditors should consider financial ratios, especially profitability, liquidity, and activity as information material in assessing the company's financial distress condition . Keywords: Activity; Financial Distress; Leverage; Liquidity; Profitability; Sales Growth

Analisis Pengaruh Good Corporate Governance Terhadap Financial Distress Dimoderasi Kinerja Keuangan

The purpose of this study is to analyze and describe the influence of Good Corporate Governance which is proxied by Institutional Ownership, Managerial Ownership, Board of Directors, Board of Commissioners, Independent Commissioners and Audit Committee on Financial Distress with Financial Performance as a moderator. The research population consists of 170 manufacturing companies in 2020-2021 which are listed on the Indonesia Stock Exchange (IDX). The sample research method used was purposive sampling and 46 units of analysis were selected from 23 companies. The data analysis technique used in this study is regression analysis and uses a quantitative approach using IBM SPSS. The results of the hypothesis test show that Institutional Ownership, Managerial Ownership, Independent Commissioners and the Board of Commissioners have no effect on financial distress while the Board of Directors and Audit Committee have an effect on Financial Distress in companies in the manufacturing sector. The independent variables in this study explain 19.40% of financial distress conditions in manufacturing companies where the other 80.60% are influenced by other variables not analyzed in this study. The results of the study show that financial performance does not moderate the influence of Institutional Ownership, Managerial Ownership, Directors, Independent Commissioners and Audit Committees, while the Board of Commissioners shows a moderating effect on financial distress.Keywords: Good Corporate Governance, Financial Distress, Financial Performance