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Examining financial distress of the Vietnamese listed firms using accounting-based models

Financial distress is generally considered the most severe consequence for firms with poor financial performance. The emergence of the Covid-19 pandemic has adversely impacted the global business system and exacerbated the number of financially distressed firms in many countries. Only firms with str...

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Autores principales: Tran, Thao, Nguyen, Ngoc Hong, Le, Binh Thien, Thanh Vu, Nam, Vo, Duc Hong
Formato: Online Artículo Texto
Lenguaje:English
Publicado: Public Library of Science 2023
Materias:
Acceso en línea:https://www.ncbi.nlm.nih.gov/pmc/articles/PMC10204956/
https://www.ncbi.nlm.nih.gov/pubmed/37220128
http://dx.doi.org/10.1371/journal.pone.0284451
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author Tran, Thao
Nguyen, Ngoc Hong
Le, Binh Thien
Thanh Vu, Nam
Vo, Duc Hong
author_facet Tran, Thao
Nguyen, Ngoc Hong
Le, Binh Thien
Thanh Vu, Nam
Vo, Duc Hong
author_sort Tran, Thao
collection PubMed
description Financial distress is generally considered the most severe consequence for firms with poor financial performance. The emergence of the Covid-19 pandemic has adversely impacted the global business system and exacerbated the number of financially distressed firms in many countries. Only firms with strong financial fundamentals can survive extreme events such as the Covid-19 pandemic and the ongoing Russia-Ukraine conflict. Vietnam is no exception. However, studies examining financial distress using accounting-based indicators, particularly at the industry level, have largely been ignored in the Vietnamese context, particularly with the emergence of the Covid-19 pandemic. This study, therefore, comprehensively examines financial distress for 500 Vietnamese listed firms during the 2012–2021 period. Our study uses interest coverage and times-interest-earned ratios to proxy a firm’s financial distress. First, our findings confirm the validity of Altman’s Z”- score model in Vietnam only when the interest coverage ratio is used as a proxy for financial distress. Second, our empirical findings indicate that only four financial ratios, including EBIT/Total Assets, Net Income/Total Assets, Total Liabilities/Total Assets, and Total Equity/Total Liabilities, can be used in predicting financial distress in Vietnam. Third, our analysis at the industry level indicates that the "Construction & Real Estates" industry, a significant contributor to the national economy, exhibits the most significant risk exposure, particularly during the Covid-19 pandemic. Policy implications have emerged based on the findings from this study.
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spelling pubmed-102049562023-05-24 Examining financial distress of the Vietnamese listed firms using accounting-based models Tran, Thao Nguyen, Ngoc Hong Le, Binh Thien Thanh Vu, Nam Vo, Duc Hong PLoS One Research Article Financial distress is generally considered the most severe consequence for firms with poor financial performance. The emergence of the Covid-19 pandemic has adversely impacted the global business system and exacerbated the number of financially distressed firms in many countries. Only firms with strong financial fundamentals can survive extreme events such as the Covid-19 pandemic and the ongoing Russia-Ukraine conflict. Vietnam is no exception. However, studies examining financial distress using accounting-based indicators, particularly at the industry level, have largely been ignored in the Vietnamese context, particularly with the emergence of the Covid-19 pandemic. This study, therefore, comprehensively examines financial distress for 500 Vietnamese listed firms during the 2012–2021 period. Our study uses interest coverage and times-interest-earned ratios to proxy a firm’s financial distress. First, our findings confirm the validity of Altman’s Z”- score model in Vietnam only when the interest coverage ratio is used as a proxy for financial distress. Second, our empirical findings indicate that only four financial ratios, including EBIT/Total Assets, Net Income/Total Assets, Total Liabilities/Total Assets, and Total Equity/Total Liabilities, can be used in predicting financial distress in Vietnam. Third, our analysis at the industry level indicates that the "Construction & Real Estates" industry, a significant contributor to the national economy, exhibits the most significant risk exposure, particularly during the Covid-19 pandemic. Policy implications have emerged based on the findings from this study. Public Library of Science 2023-05-23 /pmc/articles/PMC10204956/ /pubmed/37220128 http://dx.doi.org/10.1371/journal.pone.0284451 Text en © 2023 Tran et al https://creativecommons.org/licenses/by/4.0/This is an open access article distributed under the terms of the Creative Commons Attribution License (https://creativecommons.org/licenses/by/4.0/) , which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.
spellingShingle Research Article
Tran, Thao
Nguyen, Ngoc Hong
Le, Binh Thien
Thanh Vu, Nam
Vo, Duc Hong
Examining financial distress of the Vietnamese listed firms using accounting-based models
title Examining financial distress of the Vietnamese listed firms using accounting-based models
title_full Examining financial distress of the Vietnamese listed firms using accounting-based models
title_fullStr Examining financial distress of the Vietnamese listed firms using accounting-based models
title_full_unstemmed Examining financial distress of the Vietnamese listed firms using accounting-based models
title_short Examining financial distress of the Vietnamese listed firms using accounting-based models
title_sort examining financial distress of the vietnamese listed firms using accounting-based models
topic Research Article
url https://www.ncbi.nlm.nih.gov/pmc/articles/PMC10204956/
https://www.ncbi.nlm.nih.gov/pubmed/37220128
http://dx.doi.org/10.1371/journal.pone.0284451
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