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1 – 10 of over 2000Sri Yogi Kottala and Atul Kumar Sahu
Ergonomics usually reciprocate the study about people fitness toward working environment. In addition, financial distress refers a condition of organizations incompetency in…
Abstract
Purpose
Ergonomics usually reciprocate the study about people fitness toward working environment. In addition, financial distress refers a condition of organizations incompetency in generating sufficient revenues or incomes, which thereby refrain them to pay their financial obligations. This study aims to evaluate two independent organizational fields named as ergonomics in first phase and financial distress in manufacturing organization behavior in the second phase. The study presented a resiliency framework for operations and strategic management in the third phase based on various facts received from the distress organizations.
Design/methodology/approach
A questionnaire survey based on plant-visit is presented. The study embedded two segments to explicate its novelty. In the first segment, the plant-visit case study is presented and in the second segment, an exploratory data related to financial distress is presented. The study tried to communicate observations related to multiple decision-making fields in single umbrella, where multiple concepts like ergonomics and financial distress of organizations as well as employees are presented. DEMATEL-ANP integrated approach is used to represent the critical financial distress dimensions of employees and their ranking.
Findings
The study provided insights toward connecting two independent fields named as ergonomics and financial distress in single umbrella. The study can benefit practitioners in designing policies and procedures in their planning model to effectively achieve organizational goals. The study presented 14 financial distress drivers of employees and advocated the aggregation of ergonomics and financial distress toward developing a holistic framework for attaining organization goals for sustainability.
Originality/value
The study presented a comprehensive understanding about multiple organization decision-making fields toward developing a holistic approach from different aspects for attaining organizational sustainability. The study can be fruitful in stimulating cross-pollination of ideas between researchers and provides a good understandability of ergonomics and financial distress in single roof.
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Asad Mehmood and Francesco De Luca
This study aims to develop a model based on the financial variables for better accuracy of financial distress prediction on the sample of private French, Spanish and Italian…
Abstract
Purpose
This study aims to develop a model based on the financial variables for better accuracy of financial distress prediction on the sample of private French, Spanish and Italian firms. Thus, firms in financial difficulties could timely request for troubled debt restructuring (TDR) to continue business.
Design/methodology/approach
This study used a sample of 312 distressed and 312 non-distressed firms. It includes 60 French, 21 Spanish and 231 Italian firms in both distressed and non-distressed groups. The data are extracted from the ORBIS database. First, the authors develop a new model by replacing a ratio in the original Z”-Score model specifically for financial distress prediction and estimate its coefficients based on linear discriminant analysis (LDA). Second, using the modified Z”-Score model, the authors develop a firm TDR probability index for distressed and non-distressed firms based on the logistic regression model.
Findings
The new model (modified Z”-Score), specifically for financial distress prediction, represents higher prediction accuracy. Moreover, the firm TDR probability index accurately depicts the probabilities trend for both groups of distressed and non-distressed firms.
Research limitations/implications
The findings of this study are conclusive. However, the sample size is small. Therefore, further studies could extend the application of the prediction model developed in this study to all the EU countries.
Practical implications
This study has important practical implications. This study responds to the EU directive call by developing the financial distress prediction model to allow debtors to do timely debt restructuring and thus continue their businesses. Therefore, this study could be useful for practitioners and firm stakeholders, such as banks and other creditors, and investors.
Originality/value
This study significantly contributes to the literature in several ways. First, this study develops a model for predicting financial distress based on the argument that corporate bankruptcy and financial distress are distinct events. However, the original Z”-Score model is intended for failure prediction. Moreover, the recent literature suggests modifying and extending the prediction models. Second, the new model is tested using a sample of firms from three countries that share similarities in their TDR laws.
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Mohammad Nazrul Islam, Shihong Li and Clark M. Wheatley
The purpose of this study is to present the evidence of the association between financial statement comparability and corporate financial distress.
Abstract
Purpose
The purpose of this study is to present the evidence of the association between financial statement comparability and corporate financial distress.
Design/methodology/approach
This is an empirical study, and this study uses multiple regression analysis to evaluate hypothesis.
Findings
The authors find a significant decrease in the probability of financial distress as accounting comparability increases. Findings of this study suggest that distressed firms tend to produce financial statements that compare poorly to those of peer firms; the effectiveness of predicting financial distress with accounting ratios may be conditional on comparability with peers; and financial statement comparability may be predictive of financial distress.
Research limitations/implications
First, this study only used publicly available financial data, which may not be representative of all countries and could differ because of differences in accounting practices. Second, although this study found a connection between accounting comparability and financial distress, it cannot prove a causal relationship, as other factors that were not controlled for may also have an impact. Third, this study used various measures of financial distress, but other measures could lead to different results. Finally, this study did not include all relevant variables, such as industry-specific factors and macroeconomic conditions, which could influence the relationship between accounting comparability and financial distress.
Practical implications
For investors and financial analysts, the results imply that accounting comparability can serve as a useful signal for identifying companies that are more likely to remain financially stable in the long run. Thus, they may prefer to invest in or recommend highly comparable firms over their less comparable counterparts. For auditors, this study underscores the importance of promoting and enforcing accounting standards that improve comparability, as this can help mitigate the risk of financial distress among their clients. Regulators may also consider the implications of the study’s findings when designing policies and guidelines related to financial reporting and disclosure.
Originality/value
To the best of the authors’ knowledge, this is the first study investigating the association between financial statement comparability and corporate financial distress of the US firms. This study uses large, comprehensive and multi-year data. Furthermore, this is the only study that presents the evidence of negative association between comparability and firm financial distress.
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Ahmad Abbas and Andi Ayu Frihatni
This paper aims to demonstrate gender diversity in the structure of corporate governance and test the effect of diversity on the firm performance suffering from financial distress.
Abstract
Purpose
This paper aims to demonstrate gender diversity in the structure of corporate governance and test the effect of diversity on the firm performance suffering from financial distress.
Design/methodology/approach
The paper is quantitative using a sample of 467 public firms in Indonesia. Data were analyzed into statistics descriptive and the hypothesis was tested using the test of logistic regression.
Findings
The preliminary results of the paper demonstrate the number of firms employing women and men in the structure of corporate governance of 13% on the commissioner board, 7% on the director board and 5% on the audit committee. Based on the test of effect, this paper further found that firms employing women and men (gender diversity) in the structure of the board of commissioners, tend to suffer from financial distress lower than firms only employing men (non-gender diversity).
Research limitations/implications
This paper is not an effort to make the proportion of voices of women equal to men, however the representation of women at least exists in the structure of corporate governance as part of workforce diversity and inclusivity. In addition, this paper is considered not to use panel data with the purpose of avoiding repetitive data because of the use of a nominal scale in the logistic regression model.
Practical implications
The finding of the paper is addressed to deliver insights into the current conversation on the issue of women's day with the theme of Each for Equal and to firms in positioning women in the structure of boardrooms.
Originality/value
This paper extends the limited scholarly work on the nexus between gender diversity and financial performance. The framework of social identity theory and the tenet of corporate governance are elaborated to disclose the finding that firm shareholders tend to benefit from gender diversity in the structure of the commissioner board.
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Khaled Halteh and Milind Tiwari
The prevention of fraudulent activities, particularly within a financial context, is of paramount significance in all spheres, as it not only impacts the sustainability of…
Abstract
Purpose
The prevention of fraudulent activities, particularly within a financial context, is of paramount significance in all spheres, as it not only impacts the sustainability of corporate entities but also has the potential to have a broader economy-wide impact. This paper aims to focus on dual implications associated with financial distress, the first being associated with the temptation to launder funds due to financial distress, and the second being the potential for illicit activities, such as fraud, money laundering or terror financing, to give rise to financial distress.
Design/methodology/approach
The paper examines the literature on financial distress and uses theories of financial crime to establish a link between financial distress and financial crime.
Findings
In recent years, there has been a surge in corporate financial distress, particularly in the aftermath of concurrent crises such as the COVID-19 pandemic and the Russia–Ukraine war. Through a comprehensive examination of literature pertaining to financial distress and financial crime, this study identifies a proclivity towards fraudulent conduct arising from instances of financial distress. Moreover, the engagement in such illicit activities subsequently exacerbates the financial distress. An analysis of the relationship between financial crime and financial distress reveals the existence of a vicious cycle between the two.
Originality/value
The results of this study have the potential to advance understanding of the relationship between financial distress and financial crime, which has been previously underexplored.
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Md Jahidur Rahman, Hongtao Zhu and Sihe Chen
This study aims to investigate the relationship between corporate social responsibility (CSR) and financial distress and the moderating effect of firm characteristics, auditor…
Abstract
Purpose
This study aims to investigate the relationship between corporate social responsibility (CSR) and financial distress and the moderating effect of firm characteristics, auditor characteristics and the Coronavirus disease 2019 (Covid-19) in China.
Design/methodology/approach
The research question is empirically examined on the basis of a data set of 1,257 Chinese-listed firms from 2011 to 2021. The dependent variable is financial distress risk, which is measured mainly by Z-score. CSR score is used as a proxy for CSR. Propensity score matching, two-stage least square and generalized method of moments are adopted to mitigate the potential endogeneity issue.
Findings
This study reveals that CSR can reduce financial distress. Specifically, results show an inverse relationship between CSR and financial distress, more significantly in non-state-owned enterprises, firms with non-BigN auditor and during Covid-19. The results are consistent and robust to endogeneity tests and sensitivity analyses.
Originality/value
This study enriches the literature on CSR and financial distress, resulting in a more attractive corporate environment, improved financial stability and more crisis-resistant economies in China.
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Hafiz Muhammad Muien, Sabariah Nordin and Bazeet Olayemi Badru
As the benefit of gender diversity continues to receive significant attention, a holistic investigation of its effect on corporate financial distress (CFD) is lacking. Therefore…
Abstract
Purpose
As the benefit of gender diversity continues to receive significant attention, a holistic investigation of its effect on corporate financial distress (CFD) is lacking. Therefore, this study examines the effects of board gender diversity, measured in different forms, such as the presence and proportion of female directors, family-affiliated female directors and the chief executive officer (CEO) gender, on CFD in Pakistan. The study also investigates the interacting effects of family-controlled (20 and 50% family-owned) companies on the association between board gender diversity and CFD.
Design/methodology/approach
The study applied the pooled cross-sectional logistic regression model to examine the effect of board gender diversity (presence and proportion of female directors, family-affiliated female directors and CEO gender) on CFD through a sample of 285 non-financial companies in Pakistan over the period of 2006–2017.
Findings
The results reveal that gender diversity on boards is significantly and negatively associated with CFD in Pakistan. In addition, when family ownership is 50% or more, the interacting effect of family control is found to be significant, while gender effects remain negative. The results suggest that female directors contribute to the long-term viability of companies, especially family-owned companies. Female directors are also found to be more prevalent in family-owned companies compared to their non-family counterparts.
Research limitations/implications
The findings imply that female directors may efficiently manage and control all functions necessary to guarantee the company's long-term prosperity. Similarly, gender effects can outweigh the detrimental impact of family control when female directors are in reasonable numbers and of high quality in the boardroom.
Practical implications
The practical relevance of the findings is that female directors play a significant role on the corporate board. Thus, it is a wakeup call for Pakistani companies to recognize the critical role and uniqueness of women on the corporate ladder. Family companies can also galvanize on the uniqueness of women to improve their governance structure.
Originality/value
This study adds to the literature on the benefits of gender diversity in family and non-family-owned companies. Specifically, this study applied multiple measures of gender diversity and family control in a single study. In addition, the study was conducted in a country that is ranked as the second worst country in the Global Gender Gap Index 2022, implying that investigating this type of research would go a long way towards changing the minds of corporate executives and regulators about the critical role that women can play in the economy.
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Redhwan Al-Dhamari, Hamid Al-Wesabi, Omar Al Farooque, Mosab I. Tabash and Ghaleb A. El Refae
The purpose of this study is to empirically examine how the voluntary formation of a specialised investment committee (IC) and IC characteristics affect financial distress risk…
Abstract
Purpose
The purpose of this study is to empirically examine how the voluntary formation of a specialised investment committee (IC) and IC characteristics affect financial distress risk (FDR) and whether such impact is influenced by the level of investment inefficiency.
Design/methodology/approach
The authors use a large sample of Gulf Cooperation Council (GCC) non-financial companies during 2006–2016. A principal component analysis is done to aggregate and derive a factor score for IC characteristics (i.e. independence, size and meeting) as a proxy for the effectiveness of IC. This study also uses three measurements of FDR to corroborate the findings and partitions sample firms into overinvesting and underinvesting companies to examine the potential impact of investment inefficiency on the IC–FDR nexus.
Findings
Using feasible generalised least square estimation method, the authors document that the likelihood of financial distress occurrence decreases for firms with separate ICs. The authors also find that firms with effective ICs enjoy lower FDR. In other words, the probability of financial distress minimises if the IC is large, meets frequently and has a high number of independent directors. However, the authors find neither any moderation nor any mediation effect of investment inefficiency for the impact of IC and IC attributes on FDR. The additional analysis indicates the expected benefits of an actively performing IC are amplified for firms with risk of both over- and underinvestment. These findings are robust to alternative measures of FDR and investment inefficiency, sub-sample analysis and endogeneity concerns.
Originality/value
This study, to the best of researchers’ knowledge, is the first to provide evidence in GCC firms’ perspective, suggesting that the existence of an effective IC is associated with a lower risk of financial distress, and to some extent, the economic benefits of IC are aggrandised for companies with a high probability of over- and underinvestment problems. These results are unique and contribute to a small but growing body of literature documenting the need for effective ICs and their economic consequences on investment efficiency in the FDR environment. The findings of this study carry valuable practical implications for regulatory bodies, policymakers, investors and other interested parties in the GCC region.
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Akmalia Ariff, Wan Adibah Wan Ismail, Khairul Anuar Kamarudin and Mohd Taufik Mohd Suffian
This paper examines whether financial distress is associated with tax avoidance and whether the COVID-19 pandemic moderates such association.
Abstract
Purpose
This paper examines whether financial distress is associated with tax avoidance and whether the COVID-19 pandemic moderates such association.
Design/methodology/approach
The sample covers 38,958 firm-year observations from 32 countries during the period 2015–2020. Financial distress is measured using the ZSCORE by Altman (1968), while tax avoidance is based on the book-tax difference.
Findings
Financially distressed firms exhibit low tax avoidance pre- and during the pandemic periods. The authors find higher tax avoidance during the pandemic compared to the pre-pandemic period, but the pandemic enhances the negative relationship between financial distress and tax avoidance.
Research limitations/implications
The study offers evidence on how financial distress drives firms to engage in more tax avoidance when firms globally encountered various levels of financial difficulty sparked by the economic challenges of the COVID-19 pandemic.
Practical implications
The findings provide insights to policymakers on the need to monitor and incentivise financially distressed firms, especially during economic challenges due to pandemic.
Originality/value
This study adds to the limited, albeit important, evidence on the joint effect of the COVID-19 pandemic and financial distress on tax avoidance.
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Ali Meftah Gerged, Shaojie Yao and Khaldoon Albitar
This study aims to investigate the possible implications of compliance with corporate governance (CG) provisions, including board composition and ownership structures, on the…
Abstract
Purpose
This study aims to investigate the possible implications of compliance with corporate governance (CG) provisions, including board composition and ownership structures, on the firm’s likelihood of falling into financial distress.
Design/methodology/approach
The study applies a random-effects logistic regression model as a baseline analysis using a sample of 110 FTSE 350 manufacturing companies from 2014 to 2019. This technique is supported by conducting a two-stage Heckman regression model to overcome the potential existence of endogeneity problems.
Findings
The empirical evidence suggests that board composition and ownership structure are heterogeneously associated with financial distress probabilities in that they might have either reduced or increased the financial distress of the sampled firms. Specifically, board independence, board gender diversity, audit committee independence and institutional ownership negatively influence the likelihood of financial distress. In contrast, and consistent with the expectations, ownership concentration is positively attributed to financial distress, while the board size, audit committee size and managerial ownership have insignificant impacts on financial distress.
Originality/value
The study extends the existing body of knowledge by examining the collective effect of board characteristics and ownership structures on firms’ financial distress likelihood among a sample of manufacturing firms within the FTSE 350 index post the 2008 global financial crisis and following the recent CG reforms in the UK during the study period from 2014 to 2019.
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