Open AccessPREDICTING FINANCIAL DISTRESS IN THE MALAYSIAN MARKET: HAZARD MODEL VERSUS THE LOGIT MODEL
Author(s) -
Ahmad Harith Ashrofie Hanafi,
Rohani Md-Rus,
Kamarun Nisham Taufil Mohd
Publication year - 2021
Publication title -
advanced international journal of banking, accounting and finance
Language(s) - English
Resource type - Journals
ISSN - 2682-8537
DOI - 10.35631/aijbaf.37001
Subject(s) - logit , logistic regression , econometrics , predictability , stock market , sample (material) , financial distress , financial ratio , hazard , actuarial science , hazard model , business , economics , statistics , finance , mathematics , financial system , chemistry , organic chemistry , chromatography , paleontology , horse , biology
The increasing numbers of financially distressed firms in the Malaysian market demonstrate the importance of predicting financial distress among firms in Malaysia. Using firm financial ratios, this study focuses on predicting financial distress using the hazard model and logistic regression (logit model) based on the Malaysian market. This study used listed firms on the Malaysian stock market from 2000 to 2018 to create two sets of data comprising the main sample and holdout sample in order to compare the predictability between hazard and logit models. The results clearly show that the hazard model is better compared to the logit model in predicting financial distress for the Malaysian market since more variables were found to be significant in addition to the model being more consistent in terms of accuracy.