Accountancy
Permanent URI for this collectionhttp://repository.kln.ac.lk/handle/123456789/214
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Item The use of financial ratios in predicting corporate failure in Sri Lanka(2013) Lakshan, A.M.I.; Wijekoon, N.The purpose of this research is to develop a model using financial ratios to predict corporate failure of listed companies in Sri Lanka. This study utilized publicly available data from annual reports of a sample of 70 failed firms and a sample of matched 70 non failed firms listed on Colombo stock market for a period covering the 2002 to 2008 financial years with logistic regression analysis. A total of fifteen financial ratios were used as predictor variables of corporate failure. Analysis of the statistical testing results indicated that the prediction accuracy of the model consists with financial ratios is 77.86% one year prior to failure. Furthermore, predictive accuracy of the model in all three years prior to failure is above 72%. Hence model is robust in obtaining accurate results for up to three years prior to failure. Final model includes three financial ratios; working capital to total assets, debt ratio and cash flow from operating activities to total assets. These variables are having more explanatory power to predict corporate failure. Therefore, model developed in this study can assist investors, managers, shareholders, financial institutions, auditors and regulatory agents in Sri Lanka to forecast corporate failure of listed companies.Item Predicting corporate failure of listed companies in Sri Lanka(2012) Lakshan, A.M.I.; Wijekoon, N.The purpose of this research is to develop a model to predict corporate failure of listed companies in Sri Lanka. This study utilized publicly available data from annual repots of a sample of 70 failed firms and a sample of matched 70 non failed firms listed on Colombo stock market for a period covering the 2002 to 2008 financial years with logistic regression analysis. A total of seven corporate governance variables were used as predictor variables of corporate failure. Analysis of the statistical testing results indicated that Model consists with corporate governance variables improved the prediction accuracy to reach 82.86% one year prior to failure. Furthermore, predictive accuracy of the Model in all three years prior to failure is above 73%. Hence model is robust in obtaining accurate results for up to three years prior to failure. Final model includes four corporate governance variables, outside director ratio, CEO duality, remuneration of board of directors and company audit committee. These variables are having more explanatory power to predict corporate failure. Therefore, model developed in this study can assist investors, managers, shareholders, financial institutions, auditors and regulatory agents in Sri Lanka to forecast corporate failure of listed companies.Item An Integrated Model to Predict Corporate Failure of Listed Companies in Sri Lanka(International Journal of Business and Social Research, 2015) Wijekoon, N.; Azeez, A.A.The primary objective of this study is to develop an integrated model to predict corporate failure of listed companies in Sri Lanka. The logistic regression analysis was employed to a data set of 70 matched-pairs of failed and non-failed companies listed in the Colombo Stock Exchange (CSE) in Sri Lanka over the period 2002 to 2010. A total of fifteen financial ratios and eight corporate governance variables were used as predictor variables of corporate failure. Analysis of the statistical testing results indicated that model consists with both corporate governance variables and financial ratios improved the prediction accuracy to reach 88.57 per cent one year prior to failure. Furthermore, predictive accuracy of this model in all three years prior to failure is above 80 per cent. Hence model is robust in obtaining accurate results for up to three years prior to failure. It was further found that two financial ratios, working capital to total assets and cash flow from operating activities to total assets, and two corporate governance variables, outside director ratio and company audit committee are having more explanatory power to predict corporate failure. Therefore, model developed in this study can assist investors, managers, shareholders, financial institutions, auditors and regulatory agents in Sri Lanka to forecast corporate failure of listed companies.