The Determinants of Financial Distress in the Case of Manufacturing Share Companies in Addis Ababa, Ethiopia
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Date
2014-11
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Addis Ababa University
Abstract
The major focus of this study is to investigate empirically financial distress determinants in the case of
manufacturing share companies in Addis Ababa-Ethiopia. Twelve manufacturing share companies were included
in the sample that had at least five years annual report. Document review was used for collecting data from 2009-
2013 annual reports. In line with this objective, the study adopted quantitative methods of research approaches to
test the study hypothesis. The study applied panel data model with its random effect estimate to test a series of
hypotheses that emerge through the review of existing literature. To confidently forward conclusion, normality,
multicollinearity, heteroscedastcity and autocorrelation tests were conducted on the data. The data then was
processed using Eviews 6 statistical package. The collected data then analyzed using descriptive statistics, and
panel date regression analysis. The results show that solvability (SOL), firm size (FSIZE), economic
growth(EG) and liquidity(LI) have positive and significant influences to Debt Service Coverage (DSC) as a
proxy of financial distress. On the other hand, leverage (Lev) has a negative and significant relation with
DSC. Other variables such as profitability, efficiency and inflation have no significant impact on the status
of firm’s financial distress in manufacturing share companies in Addis Ababa-Ethiopia
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Keywords
Financial distress, Manufacturing