Abstract

Determining the financial level is important for investors and creditors so that to know whether a company is financially healthy. It has been used to evaluate the processes that produce the financial failure, determining the factors and reasons over periods of time of financial difficulties and as early as when the firm is unable to meet its obligations, access to new commitments, loss of financial balance and operating cash.

The resulting consequences of the financial limitations can be unpleasant episode and most companies experience them one way or another. The situation commonly known as financial distress is the state of being financially unhealthy in which the company cannot generate sufficient revenues or income, making it unable to meet or pay its financial obligations. As such, financial management is seen as the centre of the overall management system in business (Meredith, 1986). Many researchers have agreed that the ineffectiveness and inefficiencies of financial conduct have detrimental effects on the longevity and performance of a business.

This study attempts to identify the difficulties and issues in the process of the recovery of distressed companies and the major operational and management issues facing the financially distressed companies listed on the Malaysia Stock Exchange Malaysia. The study will look at specifically the PN17 companies on Bursa Malaysia which are identified and categorised as having heavy financial deficiency and relying on high leveraged position and their pathways to recovery until their upliftment from PN17 status and assume their listed status back. For the record, as of December 31, 2020, there were twenty-two listed companies on the Malaysia Stock Exchange or Bursa Malaysia that are classified under the Practice Note 17 or PN17 and three companies under the Guidance Note 3 or GN3 representing 2.67% of the total companies listed on the local exchange during the period. These companies were identified based on their financial disclosures and accordingly, had entered to their present status in accordance with the Bursa’s listing requirements.

As such, pursuant to the strict regulations set by Bursa Malaysia, the PN17 companies would need to regularise their financial and business plans to remain as listed counters or face the prospect of being delisted from the bourse. It is a common understanding that the unhealthy financials state of the companies will erase the confident of investors from the market to invest in their companies while on the other hand, competitors can stood to gain from the downfall of competitors by enlarged demand and market shares (Outechava, 2007).

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