Prediction of corporate financial distress using multivariate discriminant analysis for the years 2001-2005: The case of publicly-listed manufacturing firms in the Philippines

• Main Authors: Cristobal, Tatiana E., Dela Cruz, Joanna Grace A., Tubelleza, Rebekah Reyla A.
• Format: text
• Language: English
• Published: Animo Repository 2007
• Subjects: Corporations > Finance; Financial crises; Business failures; Finance and Financial Management
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/6816
• Institution: De La Salle University

The purpose of this paper was to show the relationship of financial performance and financial distress. Individual variables were used that were deemed to be predictors of financial distress. The research relied on a sample of 34 publicly-listed manufacturing firms for the years 2001-2005, and used the Multivariate Discriminant Analysis (MDA). This method was used in order to show the discriminatory abilities of the variables selected and also to determine financial distress in a certain firm by creating a model based on the gathered sample. The aim of the paper was to identify financial distress and will not go beyond such findings. There may be other ways when financial distress occurs, but those were not discussed in this paper. The results of the paper showed quite an acceptable range of predictive abilities of the model, as well as described the individual contribution of the variables selected. The said model has had several obstructions due to the non-normality of the data, which was further discussed in the paper on how such characteristic occurred. The sample selected was only limited to the manufacturing industry, and the use of this model may be broadened by using it with other industries. There might have been other methods that have stronger statistical ability than this one, and it was advisable to further their research on such topic. This research may also serve as a decision making tools by managers, stakeholders and regulators that will show the performance of a firm in terms of the selected ratios presented.