Title page for ETD etd-12032012-212730


Document Type Master's Dissertation
Author Van der Colff, Francois
Email francoisvdc@webmail.co.za
URN etd-12032012-212730
Document Title Company financial failure and distress : a perspective
Degree MCom
Department Financial Management
Supervisor
Advisor Name Title
Prof S Marx Supervisor
Keywords
  • stakeholders
  • shareholders
  • financial distress
Date 2012-09-06
Availability unrestricted
Abstract
This study had a two-fold purpose. Firstly, to establish whether a model utilising a number of non-financial variables in conjunction with a model based on financial variables is able to provide a more accurate company financial distress model than a model based on financial variables only. Secondly, to reinforce the theoretical foundation of company financial distress and failure through an examination of existing studies in order to enhance insight into the financial distress and failure phenomenon.

A phased approach was applied to identify a sample of 95 companies listed on the JSE. A questionnaire comprising 14 questions, divided into five broad categories based on the strategic capability of a subject company was employed. The published Director’s Report was used to evaluate the questions on a zero to five-point scale over a 10-year observation period.

The relationship between the questionnaire test results and the De la Rey K-Score for the subject companies was tested utilising the Cramer’s V statistical test. The Cramer’s V test is a chi-square based measure of nominal association yielding a value between zero and one. A movement towards one indicates a strengthening relationship, in this instance, between the non-financial test result and the De la Rey K-Score. A movement towards zero is an indication of a weakening relationship.

A limited test result in favour of a strengthening relationship was insufficient to prove that the primary objective of this study has been achieved. The secondary objective was achieved in view that this was an exploratory study. It is, against this background, that empirical research is recommended in order to prove that a model combining financial variables with true non-financial variables should provide a more accurate company distress prediction model.

© 2012 University of Pretoria. All rights reserved. The copyright in this work vests in the University of Pretoria. No part of this work may be reproduced or transmitted in any form or by any means, without the prior written permission of the University of Pretoria.

Please cite as follows:

Van der Colff, F 2012, Company financial failure and distress : a perspective , MCom dissertation, University of Pretoria, Pretoria, viewed yymmdd < http://upetd.up.ac.za/thesis/available/etd-12032012-212730/ >

F12/9/2/ag

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