PREDICTING FINANCIAL DISTRESS IN MALAYSIA AND ITS EFFECT ON STOCK RETURNS
Unstable economic conditions have an adverse impact on the financial performance of firms, leading to financial distress, which is an unfavourable situation for investors as it may affect their investment returns. Thus, this study attempted to predict financial distress and to examine the effect of...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
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Universiti Utara Malaysia
2021-06-01
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| Series: | The International Journal of Banking and Finance |
| Subjects: | |
| Online Access: | https://e-journal.uum.edu.my/index.php/ijbf/article/view/12644 |
| _version_ | 1797956349312630784 |
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| author | Ahmad Harith Ashrofie Hanafi Rohani Md-Rus Kamarun Nisham Taufil Mohd |
| author_facet | Ahmad Harith Ashrofie Hanafi Rohani Md-Rus Kamarun Nisham Taufil Mohd |
| author_sort | Ahmad Harith Ashrofie Hanafi |
| collection | DOAJ |
| description | Unstable economic conditions have an adverse impact on the financial performance of firms, leading to financial distress, which is an unfavourable situation for investors as it may affect their investment returns. Thus, this study attempted to predict financial distress and to examine the effect of financial distress on stock returns by using firms listed on Bursa Malaysia from 1990 to 2020. This study used the logit model to find the probability of bankruptcy and also as a proxy for financial distress risk in the asset pricing model. From this study, financial distress risk was found to be insignificant in pricing stock returns in all tested models. This finding demonstrates that financial distress risk does not affect stock returns since this risk may be eliminated through diversification. |
| first_indexed | 2024-04-10T23:47:33Z |
| format | Article |
| id | doaj.art-fae3f7f259904d50a2577f7e630f403c |
| institution | Directory Open Access Journal |
| issn | 2811-3799 2590-423X |
| language | English |
| last_indexed | 2024-04-10T23:47:33Z |
| publishDate | 2021-06-01 |
| publisher | Universiti Utara Malaysia |
| record_format | Article |
| series | The International Journal of Banking and Finance |
| spelling | doaj.art-fae3f7f259904d50a2577f7e630f403c2023-01-11T03:28:21ZengUniversiti Utara MalaysiaThe International Journal of Banking and Finance2811-37992590-423X2021-06-011628111010.32890/ijbf2021.16.2.410666PREDICTING FINANCIAL DISTRESS IN MALAYSIA AND ITS EFFECT ON STOCK RETURNSAhmad Harith Ashrofie Hanafi0Rohani Md-Rus1Kamarun Nisham Taufil Mohd2 Faculty of Business and Finance, Universiti Tunku Abdul Rahman, Malaysia School of Economics, Finance and Banking Universiti Utara Malaysia, Malaysia School of Economics, Finance and Banking Universiti Utara Malaysia, Malaysia Unstable economic conditions have an adverse impact on the financial performance of firms, leading to financial distress, which is an unfavourable situation for investors as it may affect their investment returns. Thus, this study attempted to predict financial distress and to examine the effect of financial distress on stock returns by using firms listed on Bursa Malaysia from 1990 to 2020. This study used the logit model to find the probability of bankruptcy and also as a proxy for financial distress risk in the asset pricing model. From this study, financial distress risk was found to be insignificant in pricing stock returns in all tested models. This finding demonstrates that financial distress risk does not affect stock returns since this risk may be eliminated through diversification.https://e-journal.uum.edu.my/index.php/ijbf/article/view/12644predicting financial distressfinancial distress riskstock returns |
| spellingShingle | Ahmad Harith Ashrofie Hanafi Rohani Md-Rus Kamarun Nisham Taufil Mohd PREDICTING FINANCIAL DISTRESS IN MALAYSIA AND ITS EFFECT ON STOCK RETURNS The International Journal of Banking and Finance predicting financial distress financial distress risk stock returns |
| title | PREDICTING FINANCIAL DISTRESS IN MALAYSIA AND ITS EFFECT ON STOCK RETURNS |
| title_full | PREDICTING FINANCIAL DISTRESS IN MALAYSIA AND ITS EFFECT ON STOCK RETURNS |
| title_fullStr | PREDICTING FINANCIAL DISTRESS IN MALAYSIA AND ITS EFFECT ON STOCK RETURNS |
| title_full_unstemmed | PREDICTING FINANCIAL DISTRESS IN MALAYSIA AND ITS EFFECT ON STOCK RETURNS |
| title_short | PREDICTING FINANCIAL DISTRESS IN MALAYSIA AND ITS EFFECT ON STOCK RETURNS |
| title_sort | predicting financial distress in malaysia and its effect on stock returns |
| topic | predicting financial distress financial distress risk stock returns |
| url | https://e-journal.uum.edu.my/index.php/ijbf/article/view/12644 |
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