Factors Affecting to Financial Distress - An empirical study of Listed Manufacturing Companies in CSE

Abstract

Introduction-- Predicting financial distress remains an important area of focus for researchers due to its vital importance. Financial distress prediction model helps managers to take most suitable strategic decision to prevent future financial distress of a company also financial distress prediction information can be used as an early warning for bankruptcy so then management can take actions. This study attempts to examine factors affecting to corporate financial distress of listed manufacturing companies in Colombo Stock Exchange (CSE). Design/Methodology/Approach- This study was conducted using secondary data from annual reports for sample of 29 manufacturing sector firms listed in Colombo Stock Exchange for a period covering 2011-2020. Researcher used E-Views 11 software for data analysis. Financial distress identified as dependent variable while profitability, liquidity, firm size, solvency, and growth as independent variables. Findings- The results reveal that solvency and growth of a company has significantly affect to the financial distress while profitability, liquidity, firm size has no significant relationship with corporate financial distress. Conclusion – This study fulfills the existing research gap of identifying factors that affect to financial distress for manufacturing sector companies in Sri Lanka. According to research results solvency and growth having significant affect to financial distress.