Financial Indicators and Corporate Financial Distress Prediction in Context of Pakistan: A Systemic Review.

Abstract

It is feasible to predict the financial distress that a Pakistani company may experience under the current conditions. This study draws attention to key factors influencing financial forecasting and mitigation by integrating the results of several research studies conducted over the last two decades. The literature places a great deal of emphasis on financial variables such as profitability, solvency, and liquidity as indicators. Other factors that may affect prediction models is an increase in inflation, interest rates, or the gross domestic product. Corporate governance, industry dynamics, market indicators, and legal and regulatory frameworks are among the many factors that impact financial distress prediction. As far as methodologies adopted in existing research are concerned, the machine learning methods are replacing statistical methods and are providing best prediction results. Moreover, this study provides a road map for the future research diretions to be employed for financial prediction related studies.