Forecasting Corporate Failure In Malaysian Industrial Sector Firms

Muhamad Sori, Zulkarnain and Abdul Hamid, Mohamad Ali and Md. Nassir, Annuar and Mohamad, Zainal Abidin (2001) Forecasting Corporate Failure In Malaysian Industrial Sector Firms. Asian Academy of Management Journal (AAMJ), 6 (1). pp. 1-16. ISSN 1394-2603

Download (2MB) | Preview


Financial ratios have long been used as predictor of important events in financial markets of developed economies. Formulating business failure prediction models utilising financial ratios is no exception. However, there is hardly any evidence on failure prediction in developing markets such as Malaysia. This study develops a failure prediction model for industrial sector listed firms that discriminates between 24 failed and non-failed for the period 1980 to 1996. The findings show that the model correctly and significantly classified 91.1% and 89.3% of the failed and nonfailed firms respectively. An alternative prediction model developed based solely on accounting information showed similar results. These models predict failure up to 4 years before the actual event. The variables in the final model implies that profits, cash flows, working capital and net worth are important determinants of failures of firms listed in the Kuala Lumpur Stock Exchange.

Item Type: Article
Subjects: H Social Sciences > HD Industries. Land use. Labor > HD28-70 Management. Industrial Management
Divisions: Penerbit Universiti Sains Malaysia (USM Press) > Asian Academy of Management Journal (AAM)
Depositing User: Mr Firdaus Mohamad
Date Deposited: 10 Jul 2017 07:32
Last Modified: 10 Jul 2017 07:32

Actions (login required)

View Item View Item