The characteristics of financially distressed SMEs in Thailand and changes as a result of restructuring process

Abstract

Many parties such as creditors, investors, auditors, financial institutions, employees, and customers are influenced by business failure both directly and indirectly. When a business with financial problems is not able to pay its financial obligations, the business may be driven into the situation of becoming a non-performing loan business and, if the problems cannot be solved, the business may become bankrupt and forced to close down. These business failures inevitably influence all businesses as a whole. In this study, the characteristics of the Thai financially distressed SMEs have been explored in order to understand the differences between them and of the non-financially distressed SMEs and of the distressed large companies. From the result, financially distressed SMEs were obviously found to be different from the non-distressed firms and in the matter of profitability when compare with the large ones. The changes over time as they proceed through a court process specifically on the matter of profitability there was improvement, and finally a discriminant financial distress prediction model specifically for Thai SMEs with an overall accuracy 97.2% is developed to distinguish those likely to fail from those likely to succeed.