A Study of the Financial Risk Assessment of Thai Companies and the Performance of Thai Companies during the Years 2003-2012 from the Financial Crisis in the Past
This study focuses on major financial risks that affected business operation efficiency in Thailand during the subprime crisis from 2003-to 2012. Based on the intensive assessment of return on asset (ROA) and return on equity (ROE), three major financial risks were identified: liquidity, capital structure, and insolvency risks. The occurrence of this latest subprime crisis not only impacted the world economy, but also heightened inflationary pressures on the Thai economy, especially in the export sector, which accounted for 60-70 percent of the GDP. The scope of this study focuses on companies listed on the Stock Exchange of Thailand. By using the secondary data, a total of 230 samplings were drawn from seven industry groups. The data was refined and analyzed by descriptive and inferential statistics using the OLS regression with random and fixed effect tests. The empirical results showed that bankruptcy risk affected the operation of companies in all industries. In contrast, the effects of liquidity and capital structure risks varied among different industry types. In addition, the study found that the industry most affected by all financial risks which negatively impact their ROA and ROE was the consumer products industry, followed by the manufacturing industry. The financial risk only affected the ROE of some sectors, including the resources industry, services industry, and technology industry. This research suggested guidelines to handle, plan, and manage various aspects of financial risks in accordance with different industry types in times of crisis.
Keywords - Financial risk, Liquidity risk, Capital structure risk, Insolvency risk, Firm performance