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Please use this identifier to cite or link to this item: http://hdl.handle.net/1812/775

Title: Financial distress risk and stock returns: evidence of the Malaysian stock market
Authors: Mohd Azhar bin Mohd Yusof
Keywords: Financial distress risk
Stock returns
Malaysian stock market
Distress-listed companies-Malaysia
Z-Score bankruptcy prediction
Issue Date: Dec-2008
Publisher: University of Malaya
Abstract: If financial distress risk can be accurately predicted, the stock price of high distress risk firms should be discounted so as to enable investors to earn higher expected returns. This is true if the distress risk is undiversifiable or systematic. This study sets out a direct approach to examining the risk-return relationship of distress-listed companies in Malaysia. Using Z-Score bankruptcy prediction model as the proxy of distress risk and the subsequent realised stock returns of the distress-listed companies as a proxy of systematic risk, this study finds that the distress risk and the size and book-to-market equity effect are not statistically significant enough to explain the expected stock returns. It is also found that the theoretical expectation of the size and book-to-market equity effect on distress risk also does not hold in the case of the Malaysian distress listed-firms. However, similar to the findings of Griffin and Lemmon (2002), there is evidence of a significant inverse relationship between distress risk and book-to-market equity indicating that Malaysian distress listed-companies with higher probability of distress risk display lower book-to-market value of equity ratio. This study reports that it is inconclusive to deduce that distress risk is a systematic risk in relation to the Malaysian stock market.
Description: Dissertation (MBA) Faculty of Business and Accountancy, University of Malaya, 2008.
URI: http://dspace.fsktm.um.edu.my/handle/1812/775
Appears in Collections:Masters Dissertations : MBA

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