Factors leading to the success in the rehabilitation process : an empirical evidence from the Stock Exchange of Thailand

Abstract

This study provides some empirical evidence about factors leading to the success in the rehabilitation process that rehabco firms - severe financially distressed listed firms in Thailand - must accomlish to avoid the delisting status established by the Stock Exchange of Thailand (SET). The sample in this study consisted of 68 rehabco firms that were classified as 48 successfully rehabilitated firms and 20 unsuccessful ones. Based on the relevant concept and theories - the discounted free cash flow, the agency theory, and the positive accounting theory - the factors of interest in this study consisted of the value creation factors, the good corporate governance improvement factors, and the earnings management factor. After using the binary logistic regression as the statistical analysis technique, this study found that the successful rehabco firms possessed some good recovery prospects - the sales growth, and the success in the troubled debt restructuring, disclosed their corporate information more transparently, and significantly increased the level of discretionary accruals that led to the positive amount of net income, in order to attract the external funds providers and to meet the SET's rehabilitation criteria.