Long-run performance of firms emerging from financial distress: Empirical evidence from Malaysia

Authors

  • Abd Halim Ahmad Universiti Utara Malaysia
  • Nur Adiana Hiau Abdullah Universiti Utara Malaysia
  • Kamarun Nisham Taufil Mohd Universiti Utara Malaysia

DOI:

https://doi.org/10.17811/ebl.7.1.2018.47-54

Abstract

We examine the long-run performance of firms emerging from financial distress in Malaysia. The sample consists of 114 companies listed on the Bursa Malaysia stock exchange that emerged from a financially distressed classification between 2001 and 2014. We investigate whether post-distressed performance is similar to the performance of firms of equivalent size and book-to-market ratio and the market indices. The results suggest that firms emerging from financial distress in Malaysia underperform when compared to the performance of firms similar in size and book-to-market ratio and the market indices. This suggests that the post-restructuring performance of firms on the Bursa Malaysia stock exchange that have emerged from financial distress does not improve.

References

Alderson, M. J. and Betker, B. L. (1999) Assessing post-bankruptcy performance: An analysis of reorganized companies’ cash flows, Financial Management, 28, 68-82.

Barber, B. M. and Lyon, J. D. (1997) Detecting long run abnormal stock returns: The empirical power and specification of test statistics, Journal of Financial Economics, 43, 341-372.

Campbell, R. D., Giambona, E. and Sirmans, C. F. (2009) The long-horizon performance of REIT mergers, The Journal of Real Estate Finance and Economics, 38, 105-114.

Eberhart, A. C., Altman, E. I. and Aggarwal, R. (1999) The equity performance of companies emerging from bankruptcy, Journal of Finance, 54, 1855-1868.

Gilson, S. C. (1997) Transactions costs and capital structure choice: Evidence from financially distressed companies, Journal of Finance, 52, 161-196.

Gompers, P. A. and Lerner, J. (2003) The really long-run performance of initial public offerings: The Pre-Nasdaq evidence, Journal of Finance, 58(4), 1355-1392.

Hotchkiss, E. S. (1995) Post-bankruptcy performance and management turnover, Journal of Finance, 50, 3-21.

Hotchkiss, E. S. and Mooradian, R. M. (1997) Vulture investors and the market for control of distressed companies, Journal of Financial Economics, 43, 401-432.

Jory, S. R. and Madura, J. (2010). The long-run performance of companies emerging from Chapter 11 bankruptcy, Applied Financial Economics, 20, 1145-1161.

Kausar, A., Taffler, R. and Tan, C. (2009) The going-concern market anomaly, Journal of Accounting Research, 47 (1): 213-239.

Komera, S. and Lukose, P. J. J. (2013) No longer sick: what does it convey? An empirical analysis of post-bankruptcy performance, International Journal of Emerging Markets, 8, 182-202.

Loughran, T. and Ritter, J. R. (2000) Uniformly least-powerful tests of market efficiency, Journal of Financial Economics, 55, 361-389.

Downloads

Published

08-05-2018

How to Cite

Ahmad, A. H., Abdullah, N. A. H., & Taufil Mohd, K. N. (2018). Long-run performance of firms emerging from financial distress: Empirical evidence from Malaysia. Economics and Business Letters, 7(1), 47–54. https://doi.org/10.17811/ebl.7.1.2018.47-54

Issue

Vol. 7 No. 1 (2018): March

Section

Articles

License

The works published in this journal are subject to the following terms:

1. Oviedo University Press (the publisher) retains the property rights (copyright) of published works, and encourages and enables the reuse of the same under the license specified in paragraph 2.

© Ediuno. Ediciones de la Universidad de Oviedo / Oviedo University Press

2. The works are published in the online edition of the journal under a Creative Commons Attribution-Non Commercial-Non Derives 3.0 Spain (legal text). You can copy, use, distribute, transmit and publicly display, provided that: i) you cite the author and the original source of publication (journal, publisher and URL of the work), ii) they are not used for commercial purposes, iii) mentions the existence and specifications of this license.

3. Conditions of self-archiving. The author can archive the post-print version of the article (publisher’s version) on the author’s personal website and/or on the web of  the institution where he belong, including a link to the page of the journal and putting the way of citation of the work. Economics and Business Letters and its URL https://reunido.uniovi.es/index.php/EBL/index are the only authorized source for correctly giving the reference of the publisher’s version in every mention of the article.