Causes of financial distress: Evidence from PN4 investigative audit findings
This study emphasizes on 37 PN4 companies that has announced and submitted investigative audit report to the Securities Commission on causes of financial distress. This setting has been chosen as it provides direct evidence on the possible causes of financial distress.An analysis carried out on the...
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| Main Authors: | , , |
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| Format: | Conference or Workshop Item |
| Language: | English |
| Published: |
2005
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| Subjects: | |
| Online Access: | http://repo.uum.edu.my/11786/1/Norfaiezah.pdf http://repo.uum.edu.my/11786/ |
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| Institution: | Universiti Utara Malaysia |
| Language: | English |
| Summary: | This study emphasizes on 37 PN4 companies that has announced and submitted investigative audit report to the Securities Commission on causes of financial distress. This setting has been chosen as it provides direct evidence on the possible causes of financial distress.An analysis carried out on the sample reveals four primary financial
factors that were contributory to financial
distress in public listed companies. The major factors are debt (doubtful debt and higher bad debt), investment (loss on investment, loss on disconsolation and write-down/diminution value in investment, property, plant and equipment (PPE) (impairment and write-off) and finance cost (interest cost).In respect of non-financial factors, there are six main factors have been identified; fraud, non-compliance and
potential breaches, incomplete record, related party transaction, lack of due diligence, poor internal control and product failure.In summary results indicate that the contributory factor to financial distress is the Asian financial crisis that affected Malaysia in 1997.The main issues that arose from this crisis were weaknesses in the corporate system, the internal control system and corporate governance process. |
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