The determinants of financial distress cost: A case of emerging market

Figures & data

Figure 1. Theoretical framework of the study.

Table 1. Sample Distribution

Sr. #	Industrial Sector	*Total Listed Firms	**Final Sample	% of sector	% of Sample
1	Automobile and Parts	22	17	77	7.907
2	Cable and Electrical Goods	7	4	57	1.860
3	Cement	20	15	75	6.977
4	Chemicals and Fertilisers	34	27	79	12.558
5	Engineering	17	7	41	3.256
7	Food and Personal Care products	20	18	100	8.372
8	Glass and Ceramics	9	5	56	2.326
9	Leather and Tanneries	5	2	40	0.930
10	Miscellaneous	22	8	36	3.721
11	Oil and Gas	16	14	87	6.512
13	Paper and Board	10	6	60	2.791
14	Pharmaceuticals	12	6	50	2.791
15	Power Generation and Distribution	19	7	37	3.256
16	Sugar and Allied Products	32	23	72	10.698
17	Synthetic and Rayon	11	6	55	2.791
18	Technology and Communication	11	6	55	2.791
19	Textile	146	38	27	18.140
20	Tobacco	3	2	67	0.930
21	Transport	4	2	50	0.930
22	Woolen	2	1	50	0.465
	Grand Total (Non-financial)	422	214	51	100

Note: * Total number of listed firms at PSE on December 31st, 2018. ** Finally selected sample of the study after data screening and removing outliers.

Table 2. Description of variables

Variables Name	Symbol	Description
Firm size	Size	Log of Sale
Tobin’s Q	TQ	(Market value of Equity + Book value of Debt)/Total Assets
Asset Intangibility	INTANG	(Total market value/book value of assets)* 100
Changes in Investment	CINV	[Net retained cash/(fixed assets+intangible assets+current assets)]* 100

Table 3. Classification of the sample by healthy and distressed firms (based on Interest coverage ratio)

Observations	Percentage of observation
Healthy	1156
Financial distressed	770
Total	1926

Table 4. Descriptive Statistics

Variable	Obs	Mean	Std. Dev.	Min	Max
ExaFDC	1921	.938	.69	.013	3.21
LFDL	1921	.812	1.369	−1.89	3.339
TFA	1921	.445	.231	.062	.87
LTLev	1921	.076	.095	0	.324
STCred	1921	.161	.146	0	.464
Con_Own	1921	.657	.19	.326	.949

Table 5. Matrix of correlations

Variables	(1)	(2)	(3)	(4)	(5)	(6)
ExaFDC	1.000
LFDL	0.044**	1.000
TFA	0.078*	−0.211*	1.000
LTLev	−0.174**	−0.197*	0.433	1.000
STCred	0.016*	−0.268	0.183*	0.172*	1.000
Con_Own	−0.011	0.173*	−0.095	−0.090**	−0.093*	1.000

*** p <.01, ** p <.05, * p <.1

Table 6. Variance inflation factor

	VIF	1/VIF
LFDL	1.143	.875
TFA	1.268	.789
LTLev	1.258	.795
STCred	1.105	.905
Con_Own	1.038	.964
Mean VIF	1.162	.

Table 7. Regression results

ExaFDC	Coef.	St.Err.	t-value	p-value	[95% Conf	Interval]	Sig
LFDL	6.841	2.24	3.04	0.002	11.252	2.431	***
TFA	−.387	.223	−1.78	.065	−.833	.04	*
LTLev	−2.749	.358	−7.40	0.001	−3.35	−1.947	***
STCred	−.464	.227	−1.61	.108	−.809	.08
Constant	1.584	.111	9.81	0.002	.867	1.3	***
Number of Obs	1921		F (4,1703)		2.53
R-sq	0.178		Prob > F		0.0389

*** p <.01, ** p <.05, * p <.1

Table 8. Regression results (Moderating effect)

ExaFDC	Coef.	St.Err.	t-value	p-value	[95% Conf	Interval]	Sig
LFDL	6.852	2.25	3.04	0.002	11.267	2.437	***
TFA	−.375	.223	−1.73	.086	−.822	.052	*
LTLev	−2.243	.459	−4.80	0.003	−3.103	−1.304	***
STCred	−.177	.312	−0.25	.814	−.688	.533
Con_Own	.302	.297	0.68	.498	−.381	.785
LTLev* Con_Own	−.58	.313	−1.76	.089	−1.164	.063	*
STCred* Con_Own	−.496	.27	−1.47	.162	−.926	.133
Constant	.96	.223	4.23	0.001	.504	1.377	***
Number of Obs	1921		F (7,1700)		1.47
R-sq	0.195		Prob > F		0.1735

Note: *** p <.01, ** p <.05, * p <.1

Table 9. Regression results (Robustness test)

ExaFDC	Coef.	St.Err.	t-value	p-value	[95% Conf	Interval]	Sig
LFDL	8.5	2.436	3.49	0.00	13.278	3.723	***
TFA	−148.75	41.648	−3.12	.003	−211.378	−48.122	***
LTLev	−24.485	57.17	−0.43	.679	−136.485	87.616
STCred	−88.961	64.49	−1.38	.268	−215.299	37.498
CINV	.278	.757	0.36	.726	−1.208	1.758
TQ	108.767	64.803	1.67	.095	−18.495	235.529	*
Intang	−1.268	.644	−1.80	.075	−2.421	.105	*
Size	−16.627	10.379	−1.60	.129	−36.959	3.725
Constant	372.635	237.701	1.57	.127	−93.25	838.521
Number of Obs	1794		F (9,1585)			1.90
R-sq	0.253		Prob > F			0.0476

Note: *** p <.01, ** p <.05, * p <.1