Perceived Failure Symptoms: Evidence from an Emerging Capital Market

Abstract:     
This study uses questionnaire approach to identify: (i) corporate distress warning signals of listed firms in an emerging capital market, Malaysia, (ii) the importance of each warning signal in conveying information to stakeholders, and (iii) the timeliness of each signal in alerting the stakeholders that the company is financially distressed. One hundred fifty copies of questionnaire were mailed and seventy three percent responded. It is found that chief executive officers (CEO) and accountants are perceived as persons most qualified and able to identify failure symptoms relative to other stakeholders. However, shareholders were perceived as the least competent persons to identify warning signals of distressed firms. Both the qualitative and quantitative information was considered important in identifying financially distressed firms. The findings suggest that though the stakeholders perceived important distressed signals to identify potential failures, not all these perceived signals were considered timely enough for effective use.

Number of Pages in PDF File: 9

Keywords: Corporate Failure, Warning Signal, Failure Symptoms, Distressed Firms and Qualitative Approach

JEL Classification: M40

working papers series