Measurement of liquidity, insolvency and market risk levels in the textile sector of Ecuador
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Published:
Dec 23, 2020
Keywords:
insolvency risk, market risk, altman, ohlson, textile sector of Ecuador
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Abstract
A company is exposed to different types of financial risk (systematic and non-systematic risks). This research focuses on analyzing the insolvency, market and liquidity risks of the Textile Sector of Ecuador in the period 2007-2018. Regarding the methodology, a non-experimental study was carried out with a quantitative approach. The Superintendence of Companies, Securities and Insurance was used as a source of information; also scientific information on financial risk and the textile sector in Ecuador was analyzed. In the insolvency risk analysis, through the methodologies of Altman and Ohlson, it was determined that the riskiest years are 2016 and 2018: Altman score of 5,545 and 5,690 respectively, and a percentage of insolvency risk of 6,40% and 7,46% in the same years. In the market risk analysis, the Beta coefficient for the textile sector was 1,2. In addition, microenterprises have a higher level of liquidity risk, with 57,06%. Determining the financial risk of a company is an important tool for making decisions and helps to have a better vision of the fulfillment of the proposed objectives.
URL: https://revistas.uta.edu.ec/erevista/index.php/bcoyu/article/view/1014
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Orellana Osorio, I., Reyes Clavijo, M., Tonon Ordóñez, L., & Pinos Luzuriaga, L. (2020). Measurement of liquidity, insolvency and market risk levels in the textile sector of Ecuador. Boletín De Coyuntura, (27), 4–16. https://doi.org/10.31243/bcoyu.27.2020.1014
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Scientific research articles
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References
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Altman, E. (2000). Predicting financial distress of companies: revisiting the Z-score and Zeta® models. Journal of Banking & Finance, 1, 1-54. https://doi.org/10.4337/9780857936097.00027
Altman, E., Baidya, T., & Ribeiro, L. (1979). Assessing Potential Financial Problems for firms in Brazil. Journal of International Business Studies, 10, 9-24. https://doi.org/10.1057/palgrave.jibs.8490787
Altman, E., Hartzell, J., & Peck, M. (1995). Emerging market corporate bonds — a scoring system. Salomon Brothers Inc, New York University, 391-400. https://doi.org/10.1007/978-1-4615-6197-2_25
Altman, E., & Hotchkiss, E. (2006). Corporate Financial Distress and Bankruptcy. John Wiley & Sons, Inc., Hoboken, New Jersey., 3.
Beaver, W. (1966). of Failure Financial Ratios as Predictors. Journal of Accounting Research, 4, 71-111.
Berg, D. (2007). Bankruptcy prediction by generalized additive models. Applied Stochastic Models in Business and Industry, 23, 129-143. https://doi.org/10.1002/asmb.658
Boritz, E., Kennedy, D., & Sun, J. (2007). Predicting business failures in Canada. Accounting Perspectives, 6(2), 141-165. https://doi.org/10.1506/g8t2-k05v-1850-52u4
Campos, S., Castro, M., Cuy, M., & Ferrer, G. (2005). CAPM en mercados emergentes.
Celaya, R., & López, M. (2004). ¿Cómo determinar su riesgo empresarial? Revista Escuela de Administración de Negocios, 52, 69-75.
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Chaudhuri, A., & De, K. (2011). Fuzzy Support Vector Machine for bankruptcy prediction. Applied Soft Computing Journal, 11(2), 2472-2486. https://doi.org/10.1016/j.asoc.2010.10.003
Chudson, W. (1945). The Pattern of Corporate Financial Structure. National Bureau of Economic Research, 105(3), 129-133.
Circiumaru, D., Siminica, M., & Ganea, M. (2009). Basics for a Graphical Model of Risk – Performances Correlation. Annales Universitatis Apulensis series Oeconomica, 1(11), 539-545.
Cowan, K., & Hansen, E. (2008). Inversión, desfase de madurez y choques de liquidez en Chile. Trimestre Economico, 75(2), 433-470. https://doi.org/10.20430/ete.v75i298.408
Efron, B. (1975). The Efficiency of Logistic Regression Compared to Normal Discriminant Analysis. Journal of the American Statistical Association, 70(352), 892. https://doi.org/10.2307/2285453
Ferrando, M., & Blanco, F. (1998). Máximo Ferrando Bolado. Revista Espanola De Financiacion Y Contabilidad, XXi(1), 499-540.
FitzPatrick, P. (1932). Average Ratios of Twenty Representative Industrial Failures *. The certified public account, 13-18.
Ghazali, R., Jaafar Hussain, A., Mohd Nawi, N., & Mohamad, B. (2009). Non-stationary and stationary prediction of financial time series using dynamic ridge polynomial neural network. Neurocomputing, 72(10-12), 2359-2367. https://doi.org/10.1016/j.neucom.2008.12.005
Gitman, L. (2007). Principios de administración financiera. Pearson Addison Wesley.
Hablich, F., Toala, I., & Agila, M. (2018). Las empresas públicas con economía mixta en el mercado de valores en el Ecuador. Recimundo, 2(1), 784-799. https://doi.org/10.26820/recimundo/2.1.2018.784-799
Horrigan, J. (1965). Some Empirical Bases of Financial Ratio Analysis. American Accounting Association, 40(3), 558-568.
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Jackendoff, N. (1962). A Study of Published Industry Financial and Operating Ratios. En Temple University, Bureau of Economic and Business Research.
Krishnasami, J. (2012). Financial Risk: Impact on Debt-Equity Mix. SCMS Journal of Indian Management, 9(1), 43-59.
Lara, A. (2008). Medicio?n y control de riesgos financieros. Limusa.
Leiva, R. (2009). Riesgos financieros después de la crisis subprime. Contabilidad y Negocios, 4(8), 18-22.
Lieu, P. T., Lin, C. W., & Yu, H. F. (2008). Financial early-warning models on cross-holding groups. Industrial Management and Data Systems, 108(8), 1060-1080. https://doi.org/10.1108/02635570810904613
Lintner, J. (1965). The Valuation of Risk Assets and the Selection of Risky Investments in Stock Portfolios and Capital Budgets. Review Literature And Arts Of The Americas, 47(1), 13-37.
Markowitz, H. (1952). Portfolio Selection. The Journal of Finance, 7, 77-91. https://doi.org///doi.org/10.1111/j.1540-6261.1952.tb01525.x
Merwin, C. L. (1942). The Five Industries: Operations and Financial Structure. En Financing Small Corporations in Five Manufacture Industries. http://www.nber.org/chapters/c9386
Mossin, J. (1966). Equilibrium in a Capital Asset Market. The Econometric Society, 34(4), 768-783.
Ohlson, J. A. (1980). Financial Ratios and the Probabilistic Prediction of Bankruptcy. Journal of Accounting Research, 18(1), 109. https://doi.org/10.2307/2490395
Oxford Dictionary. (2020). Oxford English and Spanish Dictionary. https://www.lexico.com/definition/risk
Pascale, R. (1988). A Multivariate Model To Predict Firm Financial Problems: the Case of Uruguay. Studies in Banking and Finance, 7, 171-182.
Ross, S., Westerfield, R., & Jaffe, J. (2010). Fundamentos de finanzas corporativas (9.a ed.). McGraw-Hill Education.
Ross, S., Westerfield, R., & Jaffe, J. (2012). Finanzas corporativas (9.a ed.). McGraw-Hill Education.
Salcedo, V. (2018). La Bolsa de Valores en Ecuador; su valor creativo para la promoción de la inversión. Dilemas Contemporáneos: Educación , Política y Valores, 49, 430-439.
Sánchez, J. (2010). La tasa de descuento en países emergente aplicación al caso colombiano. Revista EAN, 69.
Sharpe, W. (1964). Capital Asset Prices: A Theory of Market Equilibrium under Conditions of Risk. The Journal of Finance, 19(3), 425-442. https://doi.org/10.2307/2329297
Shehni, M. (2013). Application and comparison of altman and ohlson models to predict bankruptcy of companies. Research Journal of Applied Sciences, Engineering and Technology, 5(6), 2007-2011. https://doi.org/10.19026/rjaset.5.4743
Smith, R., & Winakor, A. (1935). Changes in the Financial Structure of Unsuccessful Corporations. Bureau of Business Research, bulletin number 51.
Superintendency of Companies, Securities and Insurance. (2016a). Issuance and public offering of securities in Ecuador. National Directorate for Research and Studies, 41.
Superintendency of Companies, Securities and Insurance. (2016b). Resolution No. SCVS-INC-DNCDN-2016-010.
Superintendency of Companies, Securities and Insurance. (2019). Information portal. https://appscvsmovil.supercias.gob.ec/portalInformacion/sector_societario.zul
Terreno, D., Sattler, S., & Pérez, J. (2017). Las etapas del ciclo de vida de la empresa por los patrones del estado de flujo de efectivo y el riesgo de insolvencia empresarial. Contabilidad y Negocios, 12(23), 22-37. https://doi.org/10.18800/contabilidad.201701.002
Tobin, J. (1958). Liquidity Preference as Behavior Towards Risk. The Review of Economic Studies, 25(2), 65-86. https://doi.org/10.2307/2296205
Toro, J., Redondo, I., & Díaz, C. (2015). Riesgo Financiero en las Empresas de la ciudad de Medellín durante el año 2013. Gestión y Región, 20, 139-159.
United Nations Statistical Commission (UNSD). (2008). International Standard Industrial Classification of all Economic Activities ( ISIC) Rev. 4. United Nations. https://unstats.un.org/unsd/publication/seriesM/seriesm_4rev4e.pdf
Vélez-Pareja, I. (2011). Estimación de betas y relación entre las betas apalancadas y el coste del capital. Análisis financiero, 116(116), 6-13.
Altman, E. (1968). Financial ratios, discriminant analysis and the prediction of corporate bankruptcy. The Journal of Finance, 23, 589-609. https://doi.org/10.2307/2978933
Altman, E. (2000). Predicting financial distress of companies: revisiting the Z-score and Zeta® models. Journal of Banking & Finance, 1, 1-54. https://doi.org/10.4337/9780857936097.00027
Altman, E., Baidya, T., & Ribeiro, L. (1979). Assessing Potential Financial Problems for firms in Brazil. Journal of International Business Studies, 10, 9-24. https://doi.org/10.1057/palgrave.jibs.8490787
Altman, E., Hartzell, J., & Peck, M. (1995). Emerging market corporate bonds — a scoring system. Salomon Brothers Inc, New York University, 391-400. https://doi.org/10.1007/978-1-4615-6197-2_25
Altman, E., & Hotchkiss, E. (2006). Corporate Financial Distress and Bankruptcy. John Wiley & Sons, Inc., Hoboken, New Jersey., 3.
Beaver, W. (1966). of Failure Financial Ratios as Predictors. Journal of Accounting Research, 4, 71-111.
Berg, D. (2007). Bankruptcy prediction by generalized additive models. Applied Stochastic Models in Business and Industry, 23, 129-143. https://doi.org/10.1002/asmb.658
Boritz, E., Kennedy, D., & Sun, J. (2007). Predicting business failures in Canada. Accounting Perspectives, 6(2), 141-165. https://doi.org/10.1506/g8t2-k05v-1850-52u4
Campos, S., Castro, M., Cuy, M., & Ferrer, G. (2005). CAPM en mercados emergentes.
Celaya, R., & López, M. (2004). ¿Cómo determinar su riesgo empresarial? Revista Escuela de Administración de Negocios, 52, 69-75.
Central Bank of Ecuador. (2018). Yearbook Bulletin - 40. https://www.bce.fin.ec/
Chaudhuri, A., & De, K. (2011). Fuzzy Support Vector Machine for bankruptcy prediction. Applied Soft Computing Journal, 11(2), 2472-2486. https://doi.org/10.1016/j.asoc.2010.10.003
Chudson, W. (1945). The Pattern of Corporate Financial Structure. National Bureau of Economic Research, 105(3), 129-133.
Circiumaru, D., Siminica, M., & Ganea, M. (2009). Basics for a Graphical Model of Risk – Performances Correlation. Annales Universitatis Apulensis series Oeconomica, 1(11), 539-545.
Cowan, K., & Hansen, E. (2008). Inversión, desfase de madurez y choques de liquidez en Chile. Trimestre Economico, 75(2), 433-470. https://doi.org/10.20430/ete.v75i298.408
Efron, B. (1975). The Efficiency of Logistic Regression Compared to Normal Discriminant Analysis. Journal of the American Statistical Association, 70(352), 892. https://doi.org/10.2307/2285453
Ferrando, M., & Blanco, F. (1998). Máximo Ferrando Bolado. Revista Espanola De Financiacion Y Contabilidad, XXi(1), 499-540.
FitzPatrick, P. (1932). Average Ratios of Twenty Representative Industrial Failures *. The certified public account, 13-18.
Ghazali, R., Jaafar Hussain, A., Mohd Nawi, N., & Mohamad, B. (2009). Non-stationary and stationary prediction of financial time series using dynamic ridge polynomial neural network. Neurocomputing, 72(10-12), 2359-2367. https://doi.org/10.1016/j.neucom.2008.12.005
Gitman, L. (2007). Principios de administración financiera. Pearson Addison Wesley.
Hablich, F., Toala, I., & Agila, M. (2018). Las empresas públicas con economía mixta en el mercado de valores en el Ecuador. Recimundo, 2(1), 784-799. https://doi.org/10.26820/recimundo/2.1.2018.784-799
Horrigan, J. (1965). Some Empirical Bases of Financial Ratio Analysis. American Accounting Association, 40(3), 558-568.
Hua, Z., Wang, Y., Xu, X., Zhang, B., & Liang, L. (2007). Predicting corporate financial distress based on integration of support vector machine and logistic regression. Expert Systems with Applications, 33(2), 434-440. https://doi.org/10.1016/j.eswa.2006.05.006
Jackendoff, N. (1962). A Study of Published Industry Financial and Operating Ratios. En Temple University, Bureau of Economic and Business Research.
Krishnasami, J. (2012). Financial Risk: Impact on Debt-Equity Mix. SCMS Journal of Indian Management, 9(1), 43-59.
Lara, A. (2008). Medicio?n y control de riesgos financieros. Limusa.
Leiva, R. (2009). Riesgos financieros después de la crisis subprime. Contabilidad y Negocios, 4(8), 18-22.
Lieu, P. T., Lin, C. W., & Yu, H. F. (2008). Financial early-warning models on cross-holding groups. Industrial Management and Data Systems, 108(8), 1060-1080. https://doi.org/10.1108/02635570810904613
Lintner, J. (1965). The Valuation of Risk Assets and the Selection of Risky Investments in Stock Portfolios and Capital Budgets. Review Literature And Arts Of The Americas, 47(1), 13-37.
Markowitz, H. (1952). Portfolio Selection. The Journal of Finance, 7, 77-91. https://doi.org///doi.org/10.1111/j.1540-6261.1952.tb01525.x
Merwin, C. L. (1942). The Five Industries: Operations and Financial Structure. En Financing Small Corporations in Five Manufacture Industries. http://www.nber.org/chapters/c9386
Mossin, J. (1966). Equilibrium in a Capital Asset Market. The Econometric Society, 34(4), 768-783.
Ohlson, J. A. (1980). Financial Ratios and the Probabilistic Prediction of Bankruptcy. Journal of Accounting Research, 18(1), 109. https://doi.org/10.2307/2490395
Oxford Dictionary. (2020). Oxford English and Spanish Dictionary. https://www.lexico.com/definition/risk
Pascale, R. (1988). A Multivariate Model To Predict Firm Financial Problems: the Case of Uruguay. Studies in Banking and Finance, 7, 171-182.
Ross, S., Westerfield, R., & Jaffe, J. (2010). Fundamentos de finanzas corporativas (9.a ed.). McGraw-Hill Education.
Ross, S., Westerfield, R., & Jaffe, J. (2012). Finanzas corporativas (9.a ed.). McGraw-Hill Education.
Salcedo, V. (2018). La Bolsa de Valores en Ecuador; su valor creativo para la promoción de la inversión. Dilemas Contemporáneos: Educación , Política y Valores, 49, 430-439.
Sánchez, J. (2010). La tasa de descuento en países emergente aplicación al caso colombiano. Revista EAN, 69.
Sharpe, W. (1964). Capital Asset Prices: A Theory of Market Equilibrium under Conditions of Risk. The Journal of Finance, 19(3), 425-442. https://doi.org/10.2307/2329297
Shehni, M. (2013). Application and comparison of altman and ohlson models to predict bankruptcy of companies. Research Journal of Applied Sciences, Engineering and Technology, 5(6), 2007-2011. https://doi.org/10.19026/rjaset.5.4743
Smith, R., & Winakor, A. (1935). Changes in the Financial Structure of Unsuccessful Corporations. Bureau of Business Research, bulletin number 51.
Superintendency of Companies, Securities and Insurance. (2016a). Issuance and public offering of securities in Ecuador. National Directorate for Research and Studies, 41.
Superintendency of Companies, Securities and Insurance. (2016b). Resolution No. SCVS-INC-DNCDN-2016-010.
Superintendency of Companies, Securities and Insurance. (2019). Information portal. https://appscvsmovil.supercias.gob.ec/portalInformacion/sector_societario.zul
Terreno, D., Sattler, S., & Pérez, J. (2017). Las etapas del ciclo de vida de la empresa por los patrones del estado de flujo de efectivo y el riesgo de insolvencia empresarial. Contabilidad y Negocios, 12(23), 22-37. https://doi.org/10.18800/contabilidad.201701.002
Tobin, J. (1958). Liquidity Preference as Behavior Towards Risk. The Review of Economic Studies, 25(2), 65-86. https://doi.org/10.2307/2296205
Toro, J., Redondo, I., & Díaz, C. (2015). Riesgo Financiero en las Empresas de la ciudad de Medellín durante el año 2013. Gestión y Región, 20, 139-159.
United Nations Statistical Commission (UNSD). (2008). International Standard Industrial Classification of all Economic Activities ( ISIC) Rev. 4. United Nations. https://unstats.un.org/unsd/publication/seriesM/seriesm_4rev4e.pdf
Vélez-Pareja, I. (2011). Estimación de betas y relación entre las betas apalancadas y el coste del capital. Análisis financiero, 116(116), 6-13.