Financial Distress And Its Determinants In Selected Beverage And Metal Manufacturing Firms In Ethiopia

In this paper attempts are made to identify determinants of financial distress inrnselected beverage and metal manufacturing firms in Ethiopia. The study estimatesrndeterminants of financial distress using panel data starting from 1999 to 2005. Usingrnpanel data regression, the researcher analyzed internal and some of external factorsrnaffecting firm’s financial distress.rnThe results show that profitability, firm age, liquidity and efficiency (Eff) havernpositive and significant influences to Debt Service Coverage (DSC) as a proxy ofrnfinancial distress. On the other hand, leverage (Lev) has a negative and significantrnrelation with DSC. Other variables such as operational viability and good corporaterngovernance have no significant impact on the status of firm’s financial distress.rnFurthermore, the analysis indicated that operationally viable companies in somernperiod of time should not be a guarantee that the companies going concern to fulfil itsrnliabilities. Liquidity of companies which can be a prominent point can be recognizedrnby evaluating cash flow performance.rnOn the other case, the response of financial managers to the sample questionnairesrnindicates that firm’s liquidity, leverage, profitability, efficiency; firm size and low debtrnservice coverage are the main causes of financial distress at highest degree. Thernvariable operational viability causes firm’s financial distress at higher level. On thernother hand, the variable such as macroeconomic factors, industrial relations, goodrncorporate governance implementation problems and firm age causes financialrndistress at lower level

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