Corporate recovery and restructuring : assesment of financial gearing of distressed listed companies in Malaysia

Liew, Kuang Chiang (2002) Corporate recovery and restructuring : assesment of financial gearing of distressed listed companies in Malaysia. Masters thesis, Universiti Malaysia Sarawak.

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Abstract

Companies suffered financial difficulties from high debts motivated corporations' board to seek sanctuary of Section 176(10) of Companies' Act 1965. The legal protection from the preying creditors did not seem to ease the on-going problem of corporate decline. In the year 2001, Practice Note 412001 (PN4) in part of the Listing Requirements was mandated and ninety-five (95) companies surfaced from the market as being affected issuers. Twenty-seven (27) of these affected listed companies in Kuala Lumpur Stock Exchange (KLSE) will form the subject basis of the empirical evidence in this paper. This study examined 27 out of these 95 companies for the period from 1996 to 2000. The impact to the market and its influence on corporate decline by over-gearing were assessed. Chi-square test is carried out to assess the relational distribution by industry/sector type to the whole market and six financial ratios used to probe the gearing problem. Turnaround need was not fully transparent to the shareholders to a point of compulsory obligation to regularise its financial condition imposed by the KSLE. The results revealed significant proportional relation between the industry sector group of PN4 companies and the market. The problem of financial difficulties caused by over-gearing has been proven from financial ratio analysis indicating possible inefficient management of working capital and business operations.

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