A Sector-Based Comparison of Financial Distress Prediction

Abstract

It is important to know the factors that cause financial distress in companies for being able to take preventive measures and reduce losses. Financial distress estimation provides important information about firms and sectors to stakeholders of the economy that can be listed as managers, lenders, investors, independent auditors and governments. Within the scope of this study, financial distress of companies operating in IT, manufacturing and service sectors, which are traded in Istanbul Stock Exchange, have been estimated and it has been aimed to reveal sectoral differences in estimation. Financial distress estimations of the companies in the Technology Transportation Communication sector, Food Drink Tobacco sector and Wholesale Retail Hotel Restaurant sector traded in Borsa Istanbul were made.This study uses logistic regression as the analysis technique by using the balance sheet and income statements data between the dates of 31.12.2008 and 31.12.2017.The likelihood of companies’ financial distress were calculated one year in advance the existence of the distress. According to the findings; the stock turnover rate in the Technology Transportation Communication sector, the current ratio in Food Drink Tobacco sector and the ratio of Profit Before Tax / Equity in Wholesale Retail Hotel Restaurant sector are the main indicators of the financial distress.