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The impact of financial distress risk on equity returns: A case study of non-financial firms of Pakistan Stock Exchange

Journal of Economics Bibliography

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Title The impact of financial distress risk on equity returns: A case study of non-financial firms of Pakistan Stock Exchange
 
Creator IDREES, Sahar
QAYYUM, Abdul
 
Subject Financial distress risk; Equity returns; Book-to-market effect; Size; Pakistan Stock Exchange.
G30; G32.
 
Description Abstract. This study aims to investigate the relationship of financial distress risk and the equity returns of financially distressed firms listed on Pakistan Stock Exchange (PSX). Several studies have suggested that firm distress risk factor could be behind the book-to-market and size effects. Fama and French three factor Model (1993) is used for examining the relationship among equity returns, financial distress risk, size and book-to-market equity ratio. Non-financial firms listed on PSX are taken from the time-period of 2010-2016. Ohlson’s O-Score (1980) “bankruptcy prediction model” is used for the prediction of financial distress risk and forecasted the distress risk firms listed on PSX. The panel (unbalanced) data is used to get the empirical findings and showed that the financial distress risk and book-to-market equity effect are statistically insignificant to explain the stock returns of distress firms due to the inefficiency of market. However, size effect is significant in explaining the stock returns of distress firms. The study also reveals that it is important to predict financial distress risk with a better predictor in order to avoid the uncertainties in PSX.Keywords. Financial distress risk, Equity returns, Book-to-market effect, Size, Pakistan Stock Exchange.JEL. G30, G32.
 
Publisher Journal of Economics Bibliography
 
Contributor —
 
Date 2018-07-18
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
Peer-reviewed Article
 
Format application/pdf
 
Identifier http://www.kspjournals.org/index.php/JEB/article/view/1623
10.1453/jeb.v5i2.1623
 
Source Journal of Economics Bibliography; Vol 5, No 2 (2018): June; 49-59
2149-2387
 
Language eng
 
Relation http://www.kspjournals.org/index.php/JEB/article/view/1623/1656
 
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