Bankruptcy Risk and Financial Performance of Companies Listed on the Stock Exchange of Thailand

Abstract

Financial performance is an important issue for entrepreneurs and investors. So far the number of studies on the effect of bankruptcy risk on financial performance of firms is small. Hence, this research investigates the impact of bankruptcy risk on financial performance of companies listed on the Stock Exchange of Thailand and the relevant data cover the period between 2015 and 2019. Excluded are companies operating in the finance industry. The data are analyzed by multiple regression analysis. Altman’s Z-score (1968) is used as a proxy for bankruptcy risk while ROA, ROE, and Tobin’s Q serve as proxies for financial performance. The control variables in this study are liquidity, capital structure, firm size, and inflation rate. Results reveal that Altman’s Z-score and firm size statistically and positively affect financial performance proxied by both accounting-based-measures, i.e. ROA and ROE; and market-based measures, i.e. Tobin’s Q. These results confirm that companies listed on Thailand’s Stock Exchange have low bankruptcy risk and large size is financially performed well.

Risk Performance on Financial Assessment of Insurance Firms in Egypt

“…The results of this study are consistent with theory of risk return, namely there is direct relationship between risk and return. That theory is known as efficient market theory, also in line with Lagat F. Kiprop [42] and Thitima Chaiyakul [27], who found a positive relationship between risk and financial performance but on contrary with Yu -Luen Ma & Yayuan Ren [30] which found a negative relationship between institutional ownership measured by (ratio of equity owned) and financial performance of insures during the financial crisis of 2008, but the relationship between institutional ownership with risk is positive, and the results consistent with asymmetric information approach Greenwald, Bruce and Stiglitz, Joseph E (43).…”

“…According to Sylvester Senyo Horvey & Jacob Ankamah [26], the study results elucidate that enterprise risk management has a positive and statistically significant associated association with return on equity, return on asset and Tobin Q as dependent variables measured financial assessment of both financial and non-financial firms in Ghana; regarding control variables, firm size and efficiency have a negative association with return on equity and Tobin Q, although efficiency was insignificant but ownership has a positive relationship with financial performance of both financial firms and non-financial firm. As for Thitima Chaiyakul [27], who used multiple regression analysis, the research results denote that bankruptcy measured by (Z-score) and the size of firm positively affect return on equity, return on asset and Tobin Q, while liquidity and capital structure have a statistically significant relationship with financial performance, inflation has an insignificant relationship with financial performance in firms listed on Stock Exchange of Thailand. On the other hand, Bimbin P. Chepkemoi, Steve Ndung's & Julius Kahuthia [4] study reveals indicated that financial leverage has a significant positive relationship with financial performance of non-bank financial institutes in Kenya.…”