Abstract:
The insalubrious financial condition can be enormous and it can lead to long term distress that can result to restraints of investment activities, capital flow and performance of companies. Therefore, it is important for companies to detect the reasoning that may lead to a corporate failure and take measures accordingly to abstain from such conditions. The main emphasis of this research is to examine empirically determinants of financial distress in the case of manufacturing companies is Pakistan listed on PMX. The sample consists of seventy six companies that have at least five years of annual report and balanced data. The documents review is used for the collection of data from 2010-2015 annual reports. In line with this objective, this study implements quantitative methods of research approaches to test the hypothesis of study. This study put on panel data model with its fixed effect estimate to check a series of hypotheses that developed through the review of existing literature. For a confident conclusion, normality, multicollinearity and autocorrelation test are applied on the panel data. Then, the panel data is processed by using E-views 8 statistical package. The composed data then analyze by using descriptive statistics, correlation analysis and panel data regression with its fixed effect analysis. The outcome indicates that firm size (FSIZE), profitability (Prof) and liquidity (LIQ) have progressive impact on Debt Service Coverage Ratio (DSC) as a method to measure financial distress. While on the opposite side, leverage (LEV) reveals a negative kind of relation with DSC. Remaining independent variable efficiency tells that no constructive relation exists in the way towards distress when examining the financial position of manufacturing companies in Pakistan. Thus, this study has a significant part to play in filling Gap in understanding of the determinants of financial distress among manufacturing companies in Pakistan. Such an indulgent is important because it prepares financial managers with practical knowledge of defining their financial distress.
