ABSTRACT
This paper aims to visualise three financial distress outlooks using computer simulations. The financial distress exposure for airport operations in Malaysia between 1991 and 2021 is given by Altman Z”-score and modelled by the multivariate generalized linear model (MGLM). Seven determinants contributing to the financial distress from literature are examined. The determinant series are fitted individually by using linear model with time series components and autoregressive integrated moving average models to forecast values for the next 10 financial years. Future short- to long-term memory effects following COVID-19 are apparent in time series plots. In the simulations, the MGLM procedure utilised Gaussian, gamma, and Cauchy probability distributions associated with expectations and challenges of doing business as well as uncertainties in the economy. The underlying trends of realistic, optimistic, and pessimistic financial distress outlooks insinuate that the increasing risk of financial distress of airport operations in Malaysia is expected to continue for the next decade.
ABSTRACT
Aim/Purpose This paper aims to empirically quantify the financial distress caused by the COVID-19 pandemic on companies listed on Amman Stock Exchange (ASE). The paper also aims to identify the most important predictors of financial distress pre- and mid-pandemic. Background The COVID-19 pandemic has had a huge toll, not only on human lives but also on many businesses. This provided the impetus to assess the impact of the pandemic on the financial status of Jordanian companies. Methodology The initial sample comprised 165 companies, which was cleansed and reduced to 84 companies as per data availability. Financial data pertaining to the 84 companies were collected over a two-year period, 2019 and 2020, to empirically quantify the impact of the pandemic on companies in the dataset. Two approaches were employed. The first approach involved using Multiple Discriminant Analysis (MDA) based on Altman's (1968) model to obtain the Z-score of each company over the investigation period. The second approach involved developing models using Artificial Neural Networks (ANNs) with 15 standard financial ratios to find out the most important variables in predicting financial distress and create an accurate Financial Distress Prediction (FDP) model. Contribution This research contributes by providing a better understanding of how financial distress predictors perform during dynamic and risky times. The research confirmed that in spite of the negative impact of COVID-19 on the financial health of companies, the main predictors of financial distress remained relatively steadfast. This indicates that standard financial distress predictors can be regarded as being impervious to extraneous financial and/or health calamities. Findings Results using MDA indicated that more than 63% of companies in the dataset have a lower Z-score in 2020 when compared to 2019. There was also an 8% increase in distressed companies in 2020, and around 6% of companies came to be no longer healthy. As for the models built using ANNs, results show that the most important variable in predicting financial distress is the Return on Capital. The predictive accuracy for the 2019 and 2020 models measured using the area under the Receiver Operating Characteristic (ROC) graph was 87.5% and 97.6%, respectively. Recommendations Decision makers and top management are encouraged to focus on the identified for Practitioners highly liquid ratios to make thoughtful decisions and initiate preemptive actions to avoid organizational failure. Recommendations This research can be considered a stepping stone to investigating the impact of for Researchers COVID-19 on the financial status of companies. Researchers are recommended to replicate the methods used in this research across various business sectors to understand the financial dynamics of companies during uncertain times. Impact on Society Stakeholders in Jordanian-listed companies should concentrate on the list of most important predictors of financial distress as presented in this study. Future Research Future research may focus on expanding the scope of this study by including other geographical locations to check for the generalisability of the results. Future research may also include post-COVID-19 data to check for changes in results. © 2023 Informing Science Institute. All rights reserved.
ABSTRACT
This paper assesses corporate financial distress in terms of liquidity and risk of insolvency due to the COVID-19 pandemic. We develop a novel multivariate approach to obtain monthly data on industry turnover, exploiting real time data to capture the atypical character of industry-specific disturbances. By combining the estimated set of industry revenue shocks with pre-pandemic financial statements, we quantify the impact of the pandemic on the risk of insolvency in the EU non-financial corporate sector. Our definition of risk of insolvency takes into account not only the equity position of firms, but also risks relating to overindebtedness. The analysis controls for firms that were financially vulnerable already before the pandemic, thus being prone to become at risk of insolvency also in absence of the COVID-19 turmoil. We find that, for the EU as a whole, 25% of firms exhausted their liquidity buffers by the end of 2021 (a practical cut-off date of the analysis, not an assumed end of the pandemic). Furthermore, 10% of firms which were viable before the pandemic, appear to have shifted into risk of insolvency as a result of the COVID-19 crisis. The magnification of financial vulnerability in the hardest-hit industries mainly occurs among firms with no legacy issues, i.e. firms with positive profitability pre-pandemic. A similar finding is reported for some of the hardest-hit countries, such as Italy and Spain. In other countries, such as Germany or Greece, the magnification of financial vulnerability mainly occurs among firms with negative profitability pre-pandemic.
ABSTRACT
The COVID-19 pandemic crisis and the associated lockdown measures have exerted significantly adverse effects on corporate sectors globally. Archanskaia et al. (2023) provide a novel empirical strategy to timely assess corporate financial distress in the EU. The contribution is two-fold. First, this paper's notion of financial distress considers both the equity position and corporate indebtedness. Second, the methodology proposed in this paper allows the authors to estimate corporate financial distress in the EU at a highly granular level and link micro-level simulations to sectoral macroeconomic outcomes. The methodology employed by Archanskaia et al. (2023) consists of three steps. First, the authors apply a nowcasting model to acquire monthly industrial turnover data. Second, they feed the obtained monthly industrial turnover into a profit-generating process via an accounting identity to estimate monthly firm profits at the firm level. Third, the authors use the estimated firm profits with a snapshot of information on pre-existing liquid assets to deduce the firm-level liquidity needs and the depletion of equity through the focus period during COVID-19. These estimated results on firm equity position and indebtedness enable the authors to quantity corporate financial distress in the EU via various angles (e.g., country-level heterogeneity, industry heterogeneity, and the targeting of COVID support policies). The primary advantage of this approach is that it deals with large datasets at the granular level and produces firm-level results almost in real-time. Therefore, it can help policymaking track the effects of crises over time. However, one can quickly critique this three-step approach for its susceptibility to the usual Lucas critique. That said, since the objective here is to estimate firm-level financial distress, a large structural model being more or less aggregate in nature, though able to mitigate the Lucas critique concern, will encounter significant challenges in estimating firm-level results with the requisite level of granularity offered by the available data. Therefore, I broadly concur with the authors' position that 'the specific contribution of this paper consists in striking a better balance between the need to carry out a multi-country evaluation of the pandemic's effects on industrial activity in a strongly integrated region like the EU and the difficulty of capturing time, industry, and country variation in turnover with sufficient granularity.'
ABSTRACT
Financial distress is a vexing managerial challenge for businesses worldwide, especially during a turbulent period like the COVID-19 pandemic. Motivated by an increasing number of closed businesses in Vietnam during the recent COVID-19 pandemic, this study is conducted to provide a comprehensive analysis of financial distress for Vietnamese listed firms. Machine learning approaches are employed using the annual data of 492 listed firms from 2012 to 2021. Specifically, we aim to identify the appropriate distress predictors for the Vietnamese listed firms using LASSO, a technique known to be superior compared to other variable selection techniques. Empirical results reveal that there are four key financial distress predictors for the Vietnamese listed firms, namely the ratios of (i) working capital and total assets, (ii) retained earnings and total assets, (iii) earnings before interest and taxes and total assets and (iv) net income and total assets. We also conducted an industry-level analysis and found that the Energy sector experienced the highest number of financially distressed firms during Covid-19. In contrast, Communication Services, Health Care, and Utilities had the lowest number of distressed firms. Policy implications have emerged based on these important findings from our analysis.
ABSTRACT
The author briefly comments on various measures undertaken in order to mitigate the effects of the extraordinary situation in connection with the pandemic of SARS-CoV-2 and seeks to put them into the context of the available data. In this connection, the paper mainly focuses on corporate insolvency filings, extraordinary moratoria and suspension of loan repayments. The author also briefly describes the future outlook.
ABSTRACT
Financial distress is a research topic in finance that has attracted attention from academia following past financial crises. Although previous studies associate financial distress with several elements, the relationship between distress and ESG has not been broadly explored. This paper investigates these issues by elaborating a Dynamic Network DEA model to address the underlying connections between accounting and financial indicators. Thus, a model that includes profit and loss, balance sheet, and capital and operating expenditures indicators is demonstrated under the dynamic network structure to compute financial-distress efficiency scores. Then, the impact of carryovers is considered for the accurate calculation of efficiency scores for the three substructures. The influence of contextual variables, such as socioeconomic and macroeconomic variables, and whether the firm owns an ESG Risk Score or not, is assessed through a stochastic non-linear model that combines three distinct regression types: Simplex, Tobit, and Beta. The results indicate that firms that hold an ESG Risk Score are less prone to be in financial distress, and Governance Score is negatively associated with financial distress efficiency.
ABSTRACT
Starting in March 2020, Indonesia had the COVID-19 pandemic. Furthermore, this situation has decreased the utilization of highways due to complying with the government regulation, including work from home and large-scale social restrictions to reduce the spreading the corona virus. There are three highway companies listed on Indonesia Stock Exchange such as CMNP, META, and JSMR. On the other hand, the research about the financial performance and the financial distress prediction in Highways sector, especially in Indonesia is not available during the COVID-19 pandemic. This research is aimed to evaluate the financial distress by the Zmijewski model with two criterions: bankrupt and non-bankrupt zone and the financial performance by state-owned enterprise (SOE) rating with three criterions: healthy, less healthy, and unhealthy condition. The period of research is Q1 2019 – Q1 2020 as the period before the COVID-19 pandemic and Q2 2020 – Q2 2021 as the period during the COVID-19 pandemic. The study concludes that all highway companies was in non-bankrupt zone by the Zmijewski model for both before and during the COVID-19 pandemic. In addition, based on SOE rating on average for the period before the COVID-19 pandemic, CMNP, META, and JSMR achieved rating consecutively BBB, BBB, and BB. Meanwhile, on average, for the period during the COVID-19 pandemic, CMNP, META, and JSMR achieved ratings consecutively BB, BB, and B. © 2023 by Ari Prasetyo and Taufik Faturohman.
ABSTRACT
Purpose: The prevention of fraudulent activities, particularly within a financial context, is of paramount significance in all spheres, as it not only impacts the sustainability of corporate entities but also has the potential to have a broader economy-wide impact. This paper aims to focus on dual implications associated with financial distress, the first being associated with the temptation to launder funds due to financial distress, and the second being the potential for illicit activities, such as fraud, money laundering or terror financing, to give rise to financial distress. Design/methodology/approach: The paper examines the literature on financial distress and uses theories of financial crime to establish a link between financial distress and financial crime. Findings: In recent years, there has been a surge in corporate financial distress, particularly in the aftermath of concurrent crises such as the COVID-19 pandemic and the Russia–Ukraine war. Through a comprehensive examination of literature pertaining to financial distress and financial crime, this study identifies a proclivity towards fraudulent conduct arising from instances of financial distress. Moreover, the engagement in such illicit activities subsequently exacerbates the financial distress. An analysis of the relationship between financial crime and financial distress reveals the existence of a vicious cycle between the two. Originality/value: The results of this study have the potential to advance understanding of the relationship between financial distress and financial crime, which has been previously underexplored. © 2023, Emerald Publishing Limited.
ABSTRACT
This article considers current contemporaneous practical issues of delirium care in nursing homes with reference to a hypothetical case study B.M. I introduce the diagnosis and management of delirium-superim-posed-on-dementia (DSD), being relatively common in patients in advanced phases of illness of many nursing home residents. General principles are discussed, although this article applies mainly to higher income countries. There is inevitably much palliative and end-of-life care in nursing homes, necessitating rigorous advance care planning. Nursing home residents are especially prone to acquiring infections. Urinary tract infections (UTIs) are traditionally the most commonly treat-ed infection among nursing home residents and, indeed, the accurate diagnosis of a UTI poses significant and distinctive challenges in the nursing home setting. There is no denying, however, that recently the global coronavirus (SARS-CoV-2) pandemic has posed an existential threat to both staff and residents of nursing homes. Resident-focused factors are striking. Psychotropic drugs are the most frequently prescribed medications in European nursing homes, but medication errors in nursing homes in general are relatively prevalent. Contributing factors to a high burden from pain for residents include residents belief set that age-related pain is inevitable, as well as un-der-recognition of pain and inappropriate pain assessment by clini-cians. Dehydration is associated with frailty, poor cognition, falls, de-lirium, disability, and mortality. Issues relating to the environment also matter. It is also impossible to ignore the organisational constraints on the provision of high quality care. Faced with widespread staffing short-ages, and many economies in financial distress, one partial solution is to retain current staff longer in nursing homes. Research on nursing home staffing has expanded beyond just staffing levels to include mul-tiple other staffing issues of concern.Copyright © by Societa Italiana di Gerontologia e Geriatria (SIGG).
ABSTRACT
This study was conducted to analyze the effect of liquidity ratios (LDR), profitability (ROA), and leverage (CAR) on the financial difficulties of banking companies listed on the Indonesia Stock Exchange (IDX) for the 2020-2021 period, moderated by credit risk during the COVID-19 pandemic. 19. Financial Distress was measured using the Altman Z-Score model, and compared with conditions before the 2016-2019 pandemic, so that the research data was taken from the annual report for the 2016-2021 period. The samples collected were 27 companies. This study uses quantitative analysis techniques with linear regression and processed using SPSS 22. The results of this study indicate that during the pandemic period and before COVID-19 in Indonesia, liquidity, profitability and leverage ratios have a significant effect on financial difficulties. Credit risk as a moderating variable can only strengthen the influence of the liquidity ratio and profitability ratio. Meanwhile, the leverage ratio cannot be moderated by credit risk. In the pre-pandemic period of 2016-2019, it showed that the ratio of liquidity, profitability, and leverage could not be moderated by credit risk. The findings in this study explain that banking conditions are not in financial difficulty during the pandemic, but profits for companies are low. This anomaly is caused by over-liquidity from credit that is not widely distributed to the business sector. © 2023, World Scientific and Engineering Academy and Society. All rights reserved.
ABSTRACT
This paper investigates the foremost firm-specific factors having an impact on financial distress and bankruptcy in the acute stage of the Covid-19 crisis based on data from approximately 9,000 enterprises in 25 countries. Empirical results of a random forest algorithm with SHAP values show increased odds of both bankruptcy and financial distress for firms that have problems in accessing finance, younger firms and more indebted firms. In addition, the size of the firm and the years of experience of its managers also have an impact on financial failure. However, country features are more important than firm features in predicting bankruptcy and financial distress in the Covid-19 crisis.
ABSTRACT
Purpose: This paper examines whether financial distress is associated with tax avoidance and whether the COVID-19 pandemic moderates such association. Design/methodology/approach: The sample covers 38,958 firm-year observations from 32 countries during the period 2015–2020. Financial distress is measured using the ZSCORE by Altman (1968), while tax avoidance is based on the book-tax difference. Findings: Financially distressed firms exhibit low tax avoidance pre- and during the pandemic periods. The authors find higher tax avoidance during the pandemic compared to the pre-pandemic period, but the pandemic enhances the negative relationship between financial distress and tax avoidance. Research limitations/implications: The study offers evidence on how financial distress drives firms to engage in more tax avoidance when firms globally encountered various levels of financial difficulty sparked by the economic challenges of the COVID-19 pandemic. Practical implications: The findings provide insights to policymakers on the need to monitor and incentivise financially distressed firms, especially during economic challenges due to pandemic. Originality/value: This study adds to the limited, albeit important, evidence on the joint effect of the COVID-19 pandemic and financial distress on tax avoidance. © 2023, Akmalia Ariff, Wan Adibah Wan Ismail, Khairul Anuar Kamarudin and Mohd Taufik Mohd Suffian.
ABSTRACT
Purpose: This study investigates the observed resurgence in religious beliefs seen across many societies during the COVID-19 pandemic. Using the economic theory of religious clubs, the author models religious participation during the pandemic as a mechanism for alleviating the financial distress associated with the health distress from the pandemic. Design/methodology/approach: Using data from the COVID-19 National Longitudinal Phone Survey (NLPS) in Nigeria, the author investigates the economic motivation for religious intensity during the COVID-19 pandemic. To address endogeneity concerns, the author exploits geographic variables of temperature and longitudes as sources of COVID-19 risk. Findings: Overall, health distress stimulates religious intensity. Consistent with the economic theory of religious clubs, adverse health shocks stimulate financial distress, and the effect is stronger among religious participants. Similarly, people see God and not the government as a source of protection against COVID-19. Research limitations/implications: The study's model sees religious organizations as public goods providers, especially when governments and markets are inefficient. Practical implications: The study's recommendations support an expanded role for religious networks in healthcare delivery and more public funding to attenuate the post-pandemic resurgence of social violence in economically distressed regions. Social implications: Despite the research interest in the COVID-19 pandemic, the long-term implications, many of which relate to social behavior adjustments that cause individuals to identify more closely with their social group, need greater understanding. Suppose religious intensity is linked to economic distress. In that case, this is a major source of worry for countries whose economies are subject to higher fluctuations and where the governments and markets are inefficiently organized. These regions may be more susceptible to a resurgence in religious fundamentalism associated with the economic shocks from the pandemic. Consequently, these regions would require more public funding to attenuate the potential for costly activities like organized violence, suicide attacks and terrorist activities in the aftermath of the pandemic. Originality/value: Prompted by the observation of the increase in religious identity through religious intensity during the pandemic, the author contributes by developing theoretically-based hypotheses that are incentive-compatible to provide a rational justification for the observation. The author empirically validates the hypothesis by taking advantage of the COVID-19 National Survey in Nigeria by specifically using survey rounds 4 and 7 which have more comprehensive religious items included. Peer review: The peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-11-2022-0719. © 2023, Emerald Publishing Limited.
ABSTRACT
Background: Financial toxicity (FT) is a multi-faceted construct, encompassing material hardship, psychological responses, and coping behaviors. FT adversely impacts patient-reported outcomes by decreasing mental health, affecting health-related quality of life (HRQOL), and deteriorating healthcare adherence. Few studies have assessed the relationship between financial toxicity, distress, coping, self-efficacy, and HRQOL within the context of cancer care disruptions resulting from the pandemic. Method(s): In the COVID-19 Breast Cancer Care Survey, 46 women with primary breast cancer were cross-sectionally evaluated for financial hardship (FACIT-COST), distress (Perceived Stress Scale), coping behaviors (Brief COPE), self-efficacy (Cancer Behavior Inventory-Brief) and HRQOL using the Functional Assessment of Cancer Therapy General (FACT-G) measure. Cancer care disruptions were measured with a series of questions investigating the impact of COVID-19 guidelines on access to healthcare services, treatment, and transition to telemedicine. Given the role of informal caregivers for patients' outcomes, social isolation was additionally included (PROMIS Social Isolation Scale). Descriptive statistics were computed, and bivariate correlations examined. Then, a subsequent regression model investigated predictors of FT in the present sample. Statistical analyses were performed using SAS 9.4 and significance level was set at p< 0.05. Result(s): Overall, participants were adult (Mage= 46.3+/-10.9) women diagnosed with early-stage breast cancer (75.61% Stage I/II). Approximately half of the participants were in active treatment (51.2%) and received multiple types of treatment (85.4% surgery;61% chemotherapy, and 36.5% radiation). Although all participants were insured at time of the study, the mean score of FT was 22.75 (SD=4.10, range: 0-44). Correlation analyses indicated that cancer care disruptions (r= -0.57, p<.001), health-related quality of life (r=-0.51, p=0.0007), coping behaviors (r=-0.33, p=0.037), well-being (r=0.56, p=0.0001), social isolation (r=-0.40, p=0.0096), and psychological distress (r=-0.42, p=0.0064) were significantly correlated with FT. That is, women who reported greater disrupted cancer care delivery, greater difficulties managing the illness, reduced physical and mental health, and those experiencing more social isolation reported worse financial toxicity. Results of the final regression model showed that women who experienced greater COVID19-related cancer care disruptions (beta=-2.82, p=0.0013) and isolation (beta=-0.44, p=0.0196) from supportive networks were more likely to indicate elevated FT scores. Conclusion(s): A multidisciplinary and patient-centered FT management approach can be implemented to extend current financial navigation models to address psychosocial and behavioral factors exacerbated by altered care delivery protocols.
ABSTRACT
This research proves the consistency of Agency Theory as a solution to explain the role of the influence of profitability, board size, woman on board, which is divided into two, namely woman on board of commissioner and woman on board of directors, as well as political connections to financial distress. Panel data from these variables were obtained from companies listed in LQ-45 in 2017–2021 which were then analyzed with a quantitative approach through the regression analysis of Ordinary Least Squares, Fixed Effects, Random Effects, and Robust, which was carried out simultaneously. The results of this analysis have a higher level of accuracy compared to partial testing. The first finding explains that the Profitability Ratio has a negative effect on financial distress, the second finding explains that board size has a positive effect on financial distress, the third finding explains that woman on board of commissioner has no effects on financial distress, however, the fourth finding explains that woman on board of director has a positive effect on financial distress, while the fifth finding explains the political connection has no positive effect to financial distress. Panel data-based research through simultaneous testing can be considered for principals in appointing agents to manage the company. Simultaneous analysis of panel data is a new breakthrough in research testing with more detailed results.
ABSTRACT
The explanation of risk contagion among economic players—not only in financial crises—and how they spread across the world has fascinated scholars and scientists in the last few decades. Inspired by the literature dealing with the analogy between financial systems and ecosystems, we model risk contagion by revisiting the mathematical approach of epidemiological models for infectious disease spread in a new paradigm. We propose a time delay differential system describing risk diffusion among companies inside an economic sector by means of a SIR dynamics. Contagion is modelled in terms of credit and financial risks with low and high levels. A complete theoretical analysis of the problem is carried out: well-posedness and solution positivity are proven. The existence of a risk-free steady state together with an endemic equilibrium is verified. Global asymptotic stability is investigated for both equilibria by the classical Lyapunov functional theory. The model is tested on a case study of some companies operating in the food economic sector in a specific Italian region. The analysis allows for understanding the crucial role of both incubation time and financial immunity period in the asymptotic behaviour of any solution in terms of endemic permanence of risk rather than its disappearance.
ABSTRACT
Traditional market pricing models assume frictionless markets with abundant liquidity. This traditional models also incorporate stock market liquidity as an exogenous cost. However, this paradigm has many shortcomings due to its inability to explain some of the problems associated with security market illiquidity. The aim of this study was to explore the concept of stock market liquidity during periods of financial distress. A Markov switching GARCH model was used to investigate market liquidity in the CAC 40, DAX, JSE, Nasdaq Index and the Nikkei-225 during the 2007-2008 financial crisis and the Covid-19 pandemic. The sample period was January 1, 2020 to December 31, 2021 and December 1, 2007 to June 30, 2009. From the findings, some financial markets where still liquid despite the financial crisis with the exception of the Nasdaq index. Conversely, all the financial markets under consideration displayed strong illiquidity during the covid-19 pandemic. In essence, the level of market depth has significantly decreased from the financial crisis to the covid-19 pandemic which may be attributed to increasing margin requirements and information asymmetry as well as price restrictions. There is an urgent need for regulatory authorities to review some of the trading regulations during financial distress.
ABSTRACT
We analyse the effects of the first wave of the COVID-19 crisis on the economic situation of 50+ Europeans. We construct a financial distress indicator that captures experiencing an income loss, difficulties to make ends meet and the need to postpone payments. We find that education and income before the pandemic has a protective role, and so does being past retirement age. For households under retirement age, instead, the pandemic has exacerbated inequalities. We also investigate whether households report worse difficulties in making ends meet compared to the pre-COVID-19 period. We show that their ability to make ends meet worsens more with income losses during the pandemic compared to losses experienced in the two-year period before the pandemic.
ABSTRACT
Many emerging adults have experienced increased financial distress and mental health problems during the COVID-19 pandemic, and isolation may have amplified the importance of close relationships (especially as parents' influence diminishes during this developmental stage). Using the ABC-X Model to frame our model, we tested whether financial distress (C) mediates the associations between COVID-19 impact (A) and anxiety and depressive symptoms (X), and whether or not romantic relationship quality (B) moderates these indirect associations. Our sample comprised of 1950 U.S. emerging adults in a romantic relationship. Mediation and first-stage moderated mediation were tested using structural equation modeling. Financial distress partially mediated the association between COVID-19 impact and anxiety symptoms and fully mediated the association between COVID-19 impact and depressive symptoms. Strong evidence of moderated mediation was found but in the opposite direction expected: the indirect associations of COVID-19 impact with anxiety and depressive symptoms (through financial distress) were stronger for those in high-quality romantic relationships. The findings may inform policy and practice aimed at optimizing the mental health of emerging adults, especially in light of the ongoing COVID-19 pandemic: specifically, alleviating financial distress may improve the mental health of emerging adults, while focusing on the quality of their romantic relationships may not.