Modelling small business failures in Malaysia
Small and medium-sized enterprises (SMEs) are acknowledged as significant contributors to development and growth in the economy.Since failure among SMEs is common, this study intends to build a failure prediction model for SMEs in the manufacturing sector.By using 132 Malaysian SMEs during the peri...
| Main Authors: | , , , |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
Social Science Electronic Publishing, Inc
2014
|
| Subjects: | |
| Online Access: | https://repo.uum.edu.my/id/eprint/15396/1/SSRN-id2402129.pdf |
| _version_ | 1803626968466325504 |
|---|---|
| author | Abdullah, Nur Adiana Hiau Ahmad, Abd Halim @ Hamilton Md Rus, Rohani Zainudin, Nasruddin |
| author_facet | Abdullah, Nur Adiana Hiau Ahmad, Abd Halim @ Hamilton Md Rus, Rohani Zainudin, Nasruddin |
| author_sort | Abdullah, Nur Adiana Hiau |
| collection | UUM |
| description | Small and medium-sized enterprises (SMEs) are acknowledged as significant contributors to development and growth in the economy.Since failure among SMEs is common, this study intends to build a failure prediction model for SMEs
in the manufacturing sector.By using 132 Malaysian SMEs during the period 2000 to 2010, the results show that higher gearing and lower profitability are associated with higher failure risk. Furthermore, the incorporation of firm’s age
significantly improves the model’s predictive accuracy.Receiver Operating Characteristics curve demonstrates that the models possess better prediction ability than a random model. However, a model which includes financial and non-financial variables show superior performance.This model could detect failures as early as four years prior to the event.Overall, the accuracy rate that
the model could correctly predict failures ranges from 75 percent to 89 percent.This model could be used as a refined tool to avoid possible adverse situations among the SMEs.A better credit decision making could take place that could potentially reduce non-performing loans. |
| first_indexed | 2024-07-04T05:58:36Z |
| format | Article |
| id | uum-15396 |
| institution | Universiti Utara Malaysia |
| language | English |
| last_indexed | 2024-07-04T05:58:36Z |
| publishDate | 2014 |
| publisher | Social Science Electronic Publishing, Inc |
| record_format | dspace |
| spelling | uum-153962016-04-12T06:56:37Z https://repo.uum.edu.my/id/eprint/15396/ Modelling small business failures in Malaysia Abdullah, Nur Adiana Hiau Ahmad, Abd Halim @ Hamilton Md Rus, Rohani Zainudin, Nasruddin HB Economic Theory Small and medium-sized enterprises (SMEs) are acknowledged as significant contributors to development and growth in the economy.Since failure among SMEs is common, this study intends to build a failure prediction model for SMEs in the manufacturing sector.By using 132 Malaysian SMEs during the period 2000 to 2010, the results show that higher gearing and lower profitability are associated with higher failure risk. Furthermore, the incorporation of firm’s age significantly improves the model’s predictive accuracy.Receiver Operating Characteristics curve demonstrates that the models possess better prediction ability than a random model. However, a model which includes financial and non-financial variables show superior performance.This model could detect failures as early as four years prior to the event.Overall, the accuracy rate that the model could correctly predict failures ranges from 75 percent to 89 percent.This model could be used as a refined tool to avoid possible adverse situations among the SMEs.A better credit decision making could take place that could potentially reduce non-performing loans. Social Science Electronic Publishing, Inc 2014-02-27 Article PeerReviewed application/pdf en https://repo.uum.edu.my/id/eprint/15396/1/SSRN-id2402129.pdf Abdullah, Nur Adiana Hiau and Ahmad, Abd Halim @ Hamilton and Md Rus, Rohani and Zainudin, Nasruddin (2014) Modelling small business failures in Malaysia. SSRN Electronic Journal. pp. 1-10. ISSN 1556-5068 http://doi.org/10.2139/ssrn.2402129 doi:10.2139/ssrn.2402129 doi:10.2139/ssrn.2402129 |
| spellingShingle | HB Economic Theory Abdullah, Nur Adiana Hiau Ahmad, Abd Halim @ Hamilton Md Rus, Rohani Zainudin, Nasruddin Modelling small business failures in Malaysia |
| title | Modelling small business failures in Malaysia |
| title_full | Modelling small business failures in Malaysia |
| title_fullStr | Modelling small business failures in Malaysia |
| title_full_unstemmed | Modelling small business failures in Malaysia |
| title_short | Modelling small business failures in Malaysia |
| title_sort | modelling small business failures in malaysia |
| topic | HB Economic Theory |
| url | https://repo.uum.edu.my/id/eprint/15396/1/SSRN-id2402129.pdf |
| work_keys_str_mv | AT abdullahnuradianahiau modellingsmallbusinessfailuresinmalaysia AT ahmadabdhalimhamilton modellingsmallbusinessfailuresinmalaysia AT mdrusrohani modellingsmallbusinessfailuresinmalaysia AT zainudinnasruddin modellingsmallbusinessfailuresinmalaysia |