Financial distress and restructuring outcomes in Malaysia

• Main Author: Abd Halim @ Hamilton, Ahmad
• Format: Thesis
• Language: English; English; English; English
• Published: 2019
• Subjects: HG Finance
• Online Access: https://etd.uum.edu.my/8495/1/Deposit%20Permission_s94963.pdf; https://etd.uum.edu.my/8495/2/s94963_01.pdf; https://etd.uum.edu.my/8495/3/s94963_02.pdf; https://etd.uum.edu.my/8495/4/s94963_references.docx; https://etd.uum.edu.my/8495/
• Institution: Universiti Utara Malaysia

This study examines issues of corporate restructuring using Malaysia’s distressed listed companies. The present comprehensive study on corporate financial distress in Malaysia may present some scientific contributions that could potentially provide better insights of corporate restructuring in a different institutional setting compared to those in developed countries. By utilizing an event study (market adjusted return and market model) with data from 2001 – 2014, at the time of the financial distress announcement, the capital market differentiates firms based on the expected outcomes (emerged and delisted) of the distress. Second analysis of this study is to investigate the predictors of the outcome of distress resolution. Empirical analysis suggests that earnings before interest and tax to interest expense, CAR (-1, +1), and top 10 largest shareholders could predict the outcomes of the financial distress. Finally, this study examines the long-run share price performance of the emerged companies after the restructuring period. The results suggest that the post emergence performance decline over the three years after the companies are relisted in the Bursa Malaysia, irrespective of the approach to calculate the abnormal returns and the matching procedure employed. Based on the findings, this study proposes that, in the event of financial distress, the market or investors perceive successful restructuring do not create value as financially distressed companies cannot recoup the loss value during the financial distress condition. Therefore, attention should be given to these formerly financially distressed companies to seek the reasons of declining share price performance after the companies were allowed to continue to be listed after the restructuring process. Moreover, the characteristics of the financially distressed companies that are likely to be emerged could be used as part of the evaluation by the creditors and regulators which could shorten the time taken to evaluate the reorganization plan proposed by the affected companies