Financial health and corporate performance: A comparison of manufacturing companies in China and India

• Main Authors: FOO, See Liang, PATHAK, Shaakalya
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2016
• Subjects: Financial Health; Corporate Performance; Manufacturing; Altman Z-Score; Return on Equity; China; India; Accounting; Asian Studies; Corporate Finance
• Online Access: https://ink.library.smu.edu.sg/soa_research/1534; https://ink.library.smu.edu.sg/context/soa_research/article/2561/viewcontent/7253444.pdf
• Institution: Singapore Management University

The People’s Republic of China (China) and India are two leading economies in Asia Pacific. This study examines the relationship between the financial health, as measured by the Altman Z-Score, and corporate performance, as measured by the Return on Equity (ROE), of listed manufacturing companies in these two markets. A linear regression was conducted between these variables to determine the magnitude and direction of their relationships. The trends of Z-Scores over a fourteen-year period are also analysed. The analysis covers the period from 2000 to 2013 (inclusive) and yielded a statistically positive correlation between ROE and the Z-Score for both markets. China and India both registered moderate-to-strong mean and median Z-Scores. However, China is comparatively healthier. These findings further support the economic stature of these two markets as Asian giants.