Edited by M. Kabir Hassan
Chapter 29: Testing the financial distress prediction model for sukuk- issuing companies in Malaysia
Roslina Mohamad Shafi, Sharifah Raihan Syed Mohd Zain, Mohamed Eskandar Shah Mohd Rasid and Ahamed Kameel Mydin Meera
Companies are exposed to business and financial risk and are affected by business cycles and economic downturns. A company is fortunate if it is capable of preventing and alleviating financial crises by utilizing existing financial distress models to deal with volatile markets and changes in the global economy. Such models are capable of signalling to a company worst case scenarios and remedial possibilities to prevent future distress. However, applying such risk models to sukuk-issuing companies remains a point of contention because sukuk and related bonds are fundamentally different types of financial instruments and possess dissimilar risk exposure to traditional instruments. The current study examines this difference by testing existing financial distress prediction models on sukuk-issuing companies. The results show that the Altman and Ohlson financial distress models were capable of alerting companies of possible financial distress with a 52.78 per cent prediction accuracy. Further testing revealed that the Ohlson model produced a higher prediction power than the Altman model for Malaysian sukuk-issuing companies. These signify that logit model is more powerful for sukuk issuing companies.
You are not authenticated to view the full text of this chapter or article.
Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.
Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.
Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.