An Investigation of Thai Listed Firms' Financial Distress Using Macro and Micro Variables

Sunti Tirapat · Aekkachai Nittayagasetwat

75 citations0/0 files storedMultinational Finance Journal

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Financial Distress and Bankruptcy Prediction Corporate Finance and Governance Corporate Insolvency and Governance

Abstract

The emergence of the economic crisis in Thailand in 1997 is an interesting case for academic studies. Internationally, it had a contagion effect, spreading to countries in Asia and in other regions. Domestically, it caused a great many industrial and corporate bankruptcies. The Thai economy had been relatively stable since 1984. The recent development in 1997, however, produced a sudden economic slump resulting in closures of many Thai corporations. Using a logit regression, this study develops a macro-related micro-crisis investigation model. The significance of the model is in its ability to bridge a firm's sensitivity to macroeconomic conditions and its financial characteristics in order to explore a firm's financial distress. The findings indicate that macroeconomic conditions are critical indicators of potential financial crisis for a firm. The article shows that the higher a firm's sensitivity to inflation, the higher the firm's exposure to financial distress.

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References

1998Law and Finance 1968FINANCIAL RATIOS, DISCRIMINANT ANALYSIS AND THE PREDICTION OF CORPORATE BANKRUPTCY 1980Financial Ratios and the Probabilistic Prediction of Bankruptcy 1966Financial Ratios As Predictors of Failure 1984Methodological Issues Related to the Estimation of Financial Distress Prediction Models 1994Corporate distress diagnosis: Comparisons using linear discriminant analysis and neural networks (the Italian experience)1996Contagious Currency Crises 1999What caused the Asian currency and financial crisis?

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