Does neglecting the instruments of financial failure play a role in the bankruptcy of companies?
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Author(s)Selma DouhaLink to ORCID Index: https://orcid.org/0000-0001-6342-196X
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Soufyane BoualiLink to ORCID Index: https://orcid.org/0000-0002-2621-8329
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Khadri Nadjib
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DOIhttp://dx.doi.org/10.21511/afc.04(1).2023.06
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Article InfoVolume 4 2022-2023, Issue #1, pp. 63-72
- Cited by
- 169 Views
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43 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
Corporate financial analysis tools are an important factor in corporate efficiency. Low-quality accessories for corporate financial analysis tools really brutally violate the interests of shareholders and can lead to the collapse of the business. The paper examines the development of models for predicting financial crises and compares the capabilities of existing models that can help alert management to current activity regarding an economic decision to buy shares or make loans. In the example of the NCA RUIBA company, Kida and Sherrod models were considered for predicting the financial failure of a firm. Based on the results of the calculations, it can be noted that NCA RUIBA had a good financial position when calculating the indicators according to Kida’s model, and according to the calculated data of the Sherrod model, the organization relies on external financing through high-risk loans, which is associated with the growth of non-current liabilities, especially long-term and medium-term ones. The results suggest that although corporate financial analysis tools alone are not sufficient to accurately predict financial distress, they can increase the predictive power of financial indicators and macroeconomic factors.
- Keywords
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JEL Classification (Paper profile tab)G01, G33, G17
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References49
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Tables3
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Figures0
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- Table 1. Categories by degree of risk and by measuring the ability to continue
- Table 2. Financial statements and Z-score results of Sherrod
- Table 3. Financial statements and Z-score results of Kida
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The role of moderating audit quality relationship between corporate characteristics and financial distress in the Indonesian mining sector
Perdana Wahyu Santosa ,
Martua Eliakim Tambunan ,
Eva Rohima Kumullah
doi: http://dx.doi.org/10.21511/imfi.17(2).2020.08
Investment Management and Financial Innovations Volume 17, 2020 Issue #2 pp. 88-100 Views: 1445 Downloads: 460 TO CITE АНОТАЦІЯFinancial performance and corporate governance play an important role in financial distress in the mining sector, which is one of the most significant contributors to the Indonesian economy. This study aims to analyze the effect of corporate characteristics on financial distress (FD), which is moderated by corporate governance (audit quality), and uses the controlling variables (inflation rate and GDP). The study uses data from audited financial statements from mining sector in the Indonesia Stock Exchange for the period 2013–2018. Since the dependent variable (FD) is dichotomous, this study used a binary logistic regression model, as it is the case in many studies regarding the probability of bankruptcy filing. In line with the current study and some previous studies, leverage, efficiency (activity), market-to-book value, audit quality, and GDP affect the probability of financial distress significantly. Only liquidity and inflation do not impact FD. Besides, the moderating audit quality weakens the effect of liquidity and PBV; otherwise, it strengthens leverage and efficiency in predicting financial distress. As for managerial implications, this study concludes that corporate performance, corporate governance, and macro-risk factors affect the probability of financial distress. The authors suggest that mining firms need to pay attention to corporate governance and should watch the economic condition for business sustainability.
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The value relevance of expected vs. unexpected going concern opinions
Emiliano Ruiz-Barbadillo ,
Andrés Guiral
doi: http://dx.doi.org/10.21511/imfi.16(2).2019.05
Investment Management and Financial Innovations Volume 16, 2019 Issue #2 pp. 47-65 Views: 1243 Downloads: 101 TO CITE АНОТАЦІЯPrevious event studies find that going concern opinions (GCOs) convey significant information to the market when the audit reports appear to be unexpected. Using the value relevance method, this paper examines the differential impact of expected and unexpected going concern opinions on the market value of US firms for the 2000–2006 time period. The results suggest that while both firms receiving expected and unexpected GCOs suffer a drop in their average market value, the decrease is larger in the case of firms with unexpected GCOs. It is also observed that the market tends to shift the weight they place on earnings to the book value of equity in valuing firms with unexpected GCOs. Specifically, the decrease in the pricing multiple of earnings is larger for the case of unexpected GCOs. This result suggests that GCOs are more informative when they are unexpected. The study complements existing work by exploring whether expected GCOs have any differential valuation impact than unexpected GCOs instead of looking at the informativeness of GCOs alone.
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Family firms, risk-taking and financial distress
Problems and Perspectives in Management Volume 15, 2017 Issue #2 (cont. 1) pp. 168-177 Views: 1215 Downloads: 534 TO CITE АНОТАЦІЯThe authors investigate the question of whet her qualitative characteristics are likely to explain the survival of family firms in case of financial distress and whether these variables improve the explanatory power of quantitative variables in clarifying the different probability of distress between family and non-family firms. They focus their attention on the impact of the controlling owner and, using the Socioemotional Wealth theory (SEW), study the role of the family involvement in mitigating or accentuating the likelihood of distress. Using a dataset of 1,137 Italian family and non-family firms during 2004–2013, the authors found that family firms are significantly less likely to incur distress than non-family firms. The board dimension and the number of family members on board affect the probability of distress even controlling for some firm risk characteristics such as beta and ROA volatility, and there is also evidence of a gender mitigating effect in case of a female CEO.
