1. Impending Bankruptcy: Examining Cash Flow Pattern of Distress and Healthy Firms
王许雅
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2. Contents 1
Basic information of the article 2
Research Questions 3
Significance of research 4
The research hypothesis 5
Main empirical results 6
Conclusion 7
References

3. ·Author:Adriana Shamsudin and Amrizah Kamaluddin.
1、Basic information of the article
·Topic:Impending Bankruptcy: Examining Cash Flow Pattern of Distress and Healthy Firms.
·Author:Adriana Shamsudin and Amrizah Kamaluddin.
·Literature sources: Economics and finance.

4. 2、Research Questions
Studies have proven that information on earnings has become less relevant to measure company performance during distressed situation. A relatively simple and convenient way to analyze a company’s financial status is by using cash flow information. Distressed companies are more likely to acquire external financing since the excess of cash generated from operating activities is insufficient. When the company experienced outflows in all operating, investing and financing activities, there is high tendency for the company to go bankrupt. The results also revealed that there is a significant difference between distressed and healthy companies in incidence of different patterns of cash flow.

5. 3、Significance of research
Statement of cash flows is part of financial statement components other than statement of financial position, statement of comprehensive income, statement of changes in equity and notes to the financial statements. Statement of cash flows provides information on inflows and outflows of cash in a company within one completed financial accounting period (Ibarra, 2009). According to Gup, Samson, Dugan, Kim and Jittrapanun (1993), statement of financial position and statement of comprehensive income have become the primary sources of information since accrual accounting system was used for the purpose of recording and reporting daily business transactions. However, a statement of cash flows can be used as a complement to the two statements since it uses cash basis.

6. 4、The research hypothesis
There is a significant difference between distressed and healthy companies
in incidence of different patterns of cash flow.
H1：
The hypothesis pertaining to the significant difference in incidence of different patterns of cash flow among distressed and healthy firms has been formulated as follow:
The different patterns of cash flows from operating, investing and
financing activities are statistically significant predictors of financial distress.
H2:

7. 5、Main empirical results
5.1Sample
The sample of present study comprised of 62 distressed companies and 62 healthy companies with three years of observation precedings to incidence of distress. Therefore, the total number of observation is 372.
The selection of distressed companies was based on PN17 list issued by BursaMalaysia (2014). In the present study, distressed companies were chosen based on PN17 list consistent with previous studies done by (Bee and Abdollahi, 2013; Salfizan, Amrizah and Zuraidah, 2014; Syahida and Ameer, 2010). The authors claim that the companies which are classified under Practice Note 17 (PN17) status are categorised as financial distress companies. The sample list was gathered from list of PN17 as at 31st December 2008 until 31st December The samples exclude companies from finance and insurance industries due to high dependence on economic condition (Bee and Abdollahi, 2013; Hawariah, Amrizah and Zuraidah, 2014; Jantadej, 2006; Jooste, 2007; Lightstone, Wilcox and Beaubien, 2014).

8. 5.2Date
The previous studies have used multiple regressions when the predicted outcomes or in other words the dependent variable is continuous. In the present study, as proposed by (Jantadej, 2006; Pallant, 2011), binary logistic regression needs to be used since the categorical outcomes are dichotomous which involved 2 categories (1=distressed company, 0=healthy company). In order to test the second hypothesis, the present study has employed binary logistic regression analysis to develop financial distress prediction model. This is consistent with the model developed by Jantadej (2006). The constructed model is shown as below:

9. 5.2Date

10. 5.3Findings and Discussion of Results Chi Square Test of Statistics
The overall result suggests that hypothesis 1 is supported. Within the context of Malaysian public listed companies, it is statistically proven that there is a significant difference among healthy and distressed companies in incidence of different types of cash flow patterns.

11. 5.4Binary Logistic Regression
As for the conclusion, the patterns that are able to predict financial distress are the second, third, fourth and eighth cash flow patterns. It suggests that companies which experienced distress situation are more likely to display these four types of cash flow patterns. Hypothesis 2 is partially supported.

12. 6、Conclusion
The present study had been successfully carried out to achieve the two research objectives formulated in earlier section. The first objective proposed to examine whether there is any significant difference between distressed and healthy companies in incidence of different patterns of cash flow. Apart from that, in order to achieve the objective, Chi Square Test of Statistics has been used. The results found that there is a significant difference between healthy and distressed companies in the incidence of different types of cash flow pattern. It suggests that the hypothesis one proposed in earlier section is supported.
The results suggest that these four types of cash flow pattern can be considered as predictors of financial distress. The rest of the patterns do not have any relationship with financial distress companies. Therefore, hypothesis 2 is partially supported. Overall, the findings from the present study help stakeholders and shareholders to evaluate the company’s performance. The finding of this study might also provide helpful insight especially to the existing and potential shareholders about the importance of statement of cash flow as a predictive tool of financial distress.

13. 7、References
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