Research Article
Probability of Bankruptcy of the Nonfinancial Sector: Evidence from ASEAN Developing Countries
@INPROCEEDINGS{10.4108/eai.27-7-2021.2316903, author={Rida Fauziyah and Junino Jahja}, title={Probability of Bankruptcy of the Nonfinancial Sector: Evidence from ASEAN Developing Countries}, proceedings={Proceedings of the 4th International Conference on Economics, Business and Economic Education Science, ICE-BEES 2021, 27-28 July 2021, Semarang, Indonesia}, publisher={EAI}, proceedings_a={ICE-BEES}, year={2022}, month={3}, keywords={bankruptcy default probabilities merton (1974) model public company developing country}, doi={10.4108/eai.27-7-2021.2316903} }- Rida Fauziyah
Junino Jahja
Year: 2022
Probability of Bankruptcy of the Nonfinancial Sector: Evidence from ASEAN Developing Countries
ICE-BEES
EAI
DOI: 10.4108/eai.27-7-2021.2316903
Abstract
Bankruptcy prediction is one of the hot issues in corporate finance since it plays an important role in the various decision-maker. However, the vast majority of these studies were conducted in developed countries rather than in developing countries. Thus, this paper aims to analyze the probability of bankruptcy of non-financial public companies in ASEAN’s developing countries during 2015-2020 and its correlation with several company-specific factors. Merton’s probability of default will be employed to estimate the probability of bankruptcy of each company in each country group. The result showed that on average the probability of default in Indonesia could be maintain below 50% while in Malaysia and Thailand could be maintained below 25%. This research revealed that profitability and retained earnings to total assets had a negative correlation with the probability of default while liquidity, leverage, and cash to total asset had a positive correlation with the probability of default in all representative countries. Meanwhile, firm size had a different type of correlation among representative countries. Overall, the obtained result will potentially help the practitioners and academics in seeking further exploration of bankruptcy probability prediction and its determinants in ASEAN’s developing countries.
