EARLY WARNING OF PROBLEMATIC FIRMS LISTED IN THE STOCK EXCHANGE OF THAILAND: AN INVESTIGATION OF FINANCIAL RATIOS
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Abstract
This paper aims to study early warning signs of financial ratios in problematic companies listed on the Stock Exchange of Thailand. The study samples consisted of 122 companies. The researcher observed 61 companies marked C (Caution) and NC (Non-Compliance) from listed companies on the Stock Exchange of Thailand during 2013-2019, represented by group 1, as problematic companies. In addition, the sample group included 61 unmarked C and NC companies, which were considered to be non-problem companies, represented by group 0. In this study, the researcher used the financial ratios calculated from the financial statements obtained from the SETSMART (SET Market Analysis and Reporting Tool) database on the website of the Stock Exchange of Thailand. The study found that financial ratios were statistically significant for demonstrating the pre-warning signs of problematic companies. Specifically for three years before the company was marked with C and NC, financial ratios included debt ratio, debt to equity ratio, return on equity and return on assets were found to be the warning signs. Two years before the company was marked with C and NC, the warning signs were given by 6 financial ratios: current ratio, debt to equity ratio, return on equity, asset turnover ratio, return on assets, and fixed asset turnover ratio. However, one year before the company was marked with C and NC, it was found that the four financial ratios demonstrated as the warning signs were: debt ratio, assets turnover ratio, return on assets, and fixed asset turnover ratio. These factors can explain the change in the dependent variable, namely a problematic company being, 81.1 percent, 83.6 percent, and 86.9 percent respectively.
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