An analytical study on financial stress in selected textile companies listed in bombay stock exchange bse

Abstract

The textile sector in India is facing severe financial stress over newlinethe past few years and consequent closure of textile mills has been a matter of newlinegreat concern to the government andall other stakeholders. Although newlinecorporate ethics and governance have created a platform to prevent financial newlinedistress, the early prediction of distress is essential for investors or lending newlineinstitutions who intend to protect their financial investments. As a newlineconsequence, prediction and classification of companies to determine whether newlinethey are potential candidates for financial distress have become key topics of newlinedebate and detailed research. There are several prominent models available newlinethrough the years from earlier research studies on prediction of financial newlinedistress and bankruptcy in companies. However, by far, the most prominent newlineamong all these methodologies remain Multiple Discriminant Analysis for newlinepredicting financial distress. Most of the bankruptcy prediction models based newlineon financial data of respective countries across multiple industries have its newlineown limitations in terms of predictive efficiency while applying the model for newlinea specific industry in a particular country. Further, there are several problems newlineand limitations that are associated with the usage of these Discriminant newlinemodels in today s business situations particularly in Indian context, such as newlinethe very definition of failures, instability or non-stationarity of the data, lack newlineof country - industry specific model and lack of assessment of magnitude or newlinedegree of stress or stability. Therefore these traditional models need constant newlineredevelopment or updating over time with emerging new financial data newlineresulting in new coefficients which will undoubtedly yield better efficient newlineresults. Moreover, there is, practically, no specific financial stress prediction newlinemodel based on Indian financial data available for the use of Indian corporate newlinestakeholders in textile sector. Therefore, the researcher is interested newlinetoconstruct a new financial stress prediction model to give adequate warning newlinesignal and also to build a Financial Health Assessment Framework to assess newlinethe magnitude or degree of stress or stability so predicted. newline newline