This paper examines the impact of firm-specific factors on the size of indirect financial distress costs for Malaysia's financially distressed firms. The results provide an insight into the magnitude of the indirect financial distress costs and its determinants and perhaps are one of the first to provide empirical evidence on the determinants of indirect financial distress costs for Malaysia's financially distressed firms. The results show that the average indirect financial distress cost measured by capital discount is 0.56 % and varies considerably among firms. It also suggests that only two variables, assets intangibility and size, are statistically significant at the .01 significance level.
The purpose of this study is to determine the relationship between microeconomic factors with credit risk among selected commercial banks in Malaysia. For this purpose, a sample of seven out of 27 commercial banks in Malaysia was selected and the microeconomic factors affecting credit risk with six measurements of return on asset (ROA), bank size, leverage, the ratio of capital, interest income and return on equity (ROE) were examined by applying Panel Regression Fixed Effect (FE) Model for a period 20 years from 1998 to 2017. The scope of the study covers seven selected commercial banks in Malaysia namely: Affin Bank Berhad, Alliance Bank Malaysia Berhad, CIMB Bank Berhad, Hong Leong Bank Berhad, Malayan Banking Berhad, Public Bank Berhad and RHB Bank Berhad. This study is using credit risk proxy by non-performing loan for dependent variable while independent variables that have been selected were returned on asset (ROA), bank size, leverage, the ratio of capital, interest income and return on equity (ROE). The findings of the study managed to reject the null hypothesis for return on asset, bank size, leverage, interest income and return on equity which indicates the five microeconomic variables give a significant relationship with credit risk. There are positive relationships between leverage, interest income and return on equity with credit risk while return on asset, bank size and ratio of capital are negatively related to credit risk. However, the study fails to find any significant relationship between the ratio of capital and credit risk for commercial banks in Malaysia.
The aim of this paper is to provide a quantitative estimate of the indirect financial distress costs. This paper focuses on the Malaysian trading and services sector and concentrates only on measuring the financial distress costs in terms of changes in operating performance and changes in capital values. This study will contribute to the existing literature by providing an alternative proxy for indirect financial distress costs and perhaps the first paper to provide the quantitative estimate of the costs for Malaysia's financially distressed firms. Findings from our study suggest that indirect costs exist and are found to be between 3.1 and 21.39 %. In addition to that, this paper also provides an empirical support that the indirect financial distress costs increase and become apparent as the firms near financial distress.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.