The relationship between financial distress risk and stock returns: Evidence from Sri Lanka

If financial foundation of the company is distressed and appears to be in bankruptcy, it can adversely affect all investors who are involved business partnerships with company. As main objective this study, we have analyzed whether there any significant difference between stock returns a financially non-distressed Altman Z-score model has been applied for measuring companies categorization addition Multivariate Discriminate Analysis analytical technique. Data obtained from 101 listed Colombo exchange over period five years. From companies, 59 were identified as gray area firms, whereas 42 categorized distressed. The return each check results indicate that distress risk not affected selected conclusion companies. By looking individually collectively at patterns study used effectively successful decision-making well corporate bodies when getting their investment decisions.