Impact of Probability to Default on Sugar Sector Using Firm Level Variables

Abstract

It is noticed that there are many running sugar mills in Pakistan which are facing problem of liquidity. They are not able to clear their legal liabilities. Banks are unwilling to give loans to the sugar mills because of unprecedented crisis. These crises create probability to default for firms and it is a vast concern to investors / creditors, borrowing firms, and governments. For smooth working of sugar sector, it is very important to know all factors which are creating unprecedented crisis for the sector because in recent times Punjab Government auctioned Chishtia-Sugar-Mills (Sargodha), Abdullah-Sugar-Mills (Okara), Abdullah-II Sugar-Mills (Sargodha), HaseebWaqas-Sugar-Mills (Nankana-Sahib) and Colony-Sugar-Mills (Khanewal) and stocks of these companies Shakar Ganj-I Sugar-Mills (Jhang), ShakarGanj–II Sugar-Mills (Jhang), Hussain-Sugar-Mills (Faisalabad) and Brother- Sugar-Mills (Kasur) were taken in custody because dues of sugarcane farmers were unpaid. Therefore, sugar mills owners are willing to know the importance of probability to default on sugar sector. Because of this, the importance of sugar sector and factors which are causing liquidity for sugar companies were discussed in this research.