Bankruptcy Prediction During the IMF Crisis: Evidence from Malaysian Listed Industrial Companies

24 Pages Posted: 28 Sep 2004

See all articles by Zulkarnain Muhamad Sori

Zulkarnain Muhamad Sori

INCEIF, The Global University of Islamic Finance

Yusuf Karbhari

Cardiff Business School

Abstract

This paper develops bankruptcy prediction model of considerable efficiency for firms listed and traded in a small developing economy. New findings reported in this paper help extend bankruptcy prediction literature to a different market setting. We find there are three relevant variables: total liabilities; current asset turnover; and cash ratios. The model correctly classified about nine-tenth of failed and non-failed firms in the original and holdout samples. The model predicts failure four years ahead. We also introduce a further sample comprising of those firms that had experienced financial distress between 1997-1998 (during the Asian Financial Crisis period) to assess model superiority. The predictive accuracy of the model reveals that it was significantly better than chance. Thus, these findings are somewhat different from those in the literature.

Keywords: Corporate distress, financial ratios, IMF crisis, prediction model, discriminant analysis

JEL Classification: M41, M47, G33

Suggested Citation

Muhamad Sori, Zulkarnain and Karbhari, Yusuf, Bankruptcy Prediction During the IMF Crisis: Evidence from Malaysian Listed Industrial Companies. Available at SSRN: https://ssrn.com/abstract=596183 or http://dx.doi.org/10.2139/ssrn.596183

Zulkarnain Muhamad Sori (Contact Author)

INCEIF, The Global University of Islamic Finance ( email )

Lorong Universiti A
Kuala Lumpur, Kuala Lumpur 59100
Malaysia
+60376514173 (Phone)
8 (Fax)

HOME PAGE: http://www.inceif.org/

Yusuf Karbhari

Cardiff Business School ( email )

Aberconway Building
Colum Drive
Cardiff, CF1 3EU
United Kingdom
+ 44 0 29 2087 6057 (Phone)
+ 44 0 29 2087 4419 (Fax)

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