The Impact of Equity Information as An Important Factor in Assessing Business Performance

Abstract

Assessing the business performance is an important aspect of almost all economic decisions at the microeconomic and macroeconomic level, in the short and long term. Information about the partners' relationship to the business, their interest in the evaluation of investments can be explained by various indicators. It is relevant to understand the dependencies of the business performance and the amount of equity, while negative equity can be considered as critical information of existence. The purpose of quantitative research is to identify the relationship between reported negative equity and the business performance in Slovakia on an exhaustive sample of financial data of businesses with negative equity in the period 2014–2018. The business performance with negative equity is assessed through the Altman Z-score and the IN05 index, by classifying businesses into bankruptcy, prosperity and gray zones. Pearson's correlation analysis between negative equity and Altman Z-score performance confirms the strong direct relationship between negative equity and the bankruptcy zone, the weaker indirect relationship between negative equity and the gray zone, and almost no dependence of negative equity and prosperity zone. In the case of the IN05 index, a low correlation was found between negative equity and all three zones. Although businesses with negative equity are in a bankruptcy zone, they do not have to close automatically, but they have to improve resource management, in particular to increase equity, for example by making a profit and good financial management.

A Systematic Review of Literature and Comprehensive Bibliometric Analysis of Capital Structure Issue

“…However, this definition of performance leads to the erroneous view that only those enterprises that report a profit due to management can be considered efficient. This definition does not include the crucial fact that a business performance is assessed from several perspectives, which fundamentally determine the applied performance evaluation criteria (Tasaryova & Paksiova, 2021). The most important financial decision with a significant impact on a financial performance of the enterprise is choosing the right combination of equity and debt (Valaskova et al, 2021), i.e., to determine the proper capital structure.…”

Analisis Resiko Kebangkrutan Pada Perusahaan Dengan Laporan Ekuitas Negatif

“…Hasilnya, menunjukkan bahwa ekuitas negatif bukanlah tanda kebangkrutan perusahaan. Selanjutnya, penelitian yang dilakukan oleh (Tasáryová & Pakšiová, 2021) menyatakan bahwa terdapat hubungan langsung yang kuat antara ekuitas negatif dan zona kebangkrutan, hubungan tidak langsung yang lebih lemah antara ekuitas negatif dan zona abu-abu, dan hampir tidak ada ketergantungan ekuitas negatif dan zona kemakmuran. Kemudian, penelitian yang dilakukan oleh (Ratna & Marwati, 2018) menyatakan bahwa operating capacity berpengaruh positif dan signifikan terhadap resiko kebangkrutan, sedangkan leverage dan profit margin tidak berpengaruh signifikan terhadap resiko kebangkrutan.…”

Gender diversity of board of directors and shareholders: Machine learning exploration during COVID-19

“…Hazak and Männasoo (2007) claim that companies with negative equity appear more prone to bankruptcy. Likewise, in the Central and Eastern Europe region, Kubenka et al (2018), Elexa et al (2019) and Tasákyová and Pakšiová (2021) indicate that negative equity might be considered a critical event in a company’s financial position. Unless they significantly improve their resource management, companies with negative equity face an increased likelihood of bankruptcy.…”