Indicators of financial distress - An empirical study of Indian Textile sector

  • Jyoti Jaydeep Nair N.L.Dalmia Institute of Management Studies and Research
  • J K Sachdeva
Keywords: Company Finance, Corporate Finance, Corporate Governance, Corporate Investment, Financial Statistics, Firm, Firm Level.

Abstract

 AbstractBusinesses across the globe faces challenges to ensure stability, growth and sustainability. Companies have to deal with changes in economic, social, cultural, political and technological environment. Companies failing to do may face financial distress causing default in payment of contractual obligations and erosion of shareholders wealth. In a business scenario where the stakeholders are many viz. shareholders, lenders, employees, government and society at large, protection of the interests of the stakeholders assume prime importance. Company’s management are expected to identify signals that indicate distress and take remedial measures. This paper attempts to identify distress signals in textile sector in India. Textile sector is one of the largest sector in India. However one third of companies in this sector have reported losses for the previous year. This study aims to examine the factors that can differentiate a distressed company from a non- distressed company so that the factors signifying distress can be studied. Listed companies in textile sector incurring continuous losses for three years were selected for the study. Financial ratios were used as variables. Logistic regression was applied to identify the most important factors indicating distress. It was observed that ratios measuring profitability and efficiency were significant in predicting distress. Key words:  Financial distress, distress signals, textile sector, continuous losses, financial ratios

Author Biographies

Jyoti Jaydeep Nair, N.L.Dalmia Institute of Management Studies and Research
Assistant Professor - Finance
J K Sachdeva
Former Director - Aruna Manharlal Institute of Management Studies and Research, Mumbai

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http://www.cci.in/pdfs/surveys-reports/textile-industry-in-india.pdf

http://www.indiainfoline.com/article/news-top-story/indias-macroeconomic-outlook-for-textiles-and-garments-cy2015-114122600287_1.html
Published
25-06-2016
How to Cite
Nair, J., & Sachdeva, J. (2016). Indicators of financial distress - An empirical study of Indian Textile sector. Journal of Global Economy, 12(2), 101-110. Retrieved from http://www.rcssindia.org/jge/index.php/jge/article/view/418
Section
Articles