BEYOND RATIOS: A DYNAMIC FRAMEWORK FOR FINANCIAL HEALTH EVALUATION INTEGRATING GOVERNANCE, MACROECONOMICS, AND OWNERSHIP CONCENTRATION – EVIDENCE FROM GLOBAL AND EMERGING MARKETS
DOI:
https://doi.org/10.55829/fb214f89Keywords:
Financial Health Evaluation, Corporate Governance, Financial Ratios, Macroeconomic Factors, Ownership Concentration, Theoretical Framework, Emerging Markets, IndiaAbstract
This paper presents a comprehensive theoretical framework for assessing corporate financial health, highlighting the diverse roles of financial ratios, corporate governance, macroeconomic variables, and ownership concentration. Traditional distress prediction models, which rely exclusively on financial ratios, often overlook crucial contextual details, especially in emerging markets characterized by concentrated ownership and economic volatility. Based on empirical findings, particularly from India, this framework illustrates how governance quality influences ownership effects and how both governance and ownership shape the impact of macroeconomic shocks on financial stability. The conceptual model expands understanding beyond static metrics, offering a thorough perspective for evaluating firm stability within complex institutional landscapes. This study proposes testable hypotheses and suggests directions for future research to empirically validate and enhance the framework. This integrated strategy provides essential insights for investors, regulators, and corporate managers seeking to improve financial resilience in emerging economies.
References
Abdelkader, N. A. M., & Wahba, H. H. (2024). A proposed multidimensional model for predicting financial distress: An empirical study on Egyptian listed firms. Future Business Journal, 10(1), 42. https://doi.org/10.1186/s43093-024-00328-2
[2] Abera, M., Marvadi, C., & Suthar, D. (2025). Digitization strategy and innovation performance of microfinance institutions: Mediating role of innovation capability. Journal of Accounting & Organizational Change, 21(2), 250–277. https://doi.org/10.1108/JAOC-12-2023-0241
[3] Agarwal, V., & Taffler, R. (2006). Comparing the performance of market-based and accounting- based bankruptcy prediction models.
[4] Al-Saidi, M., & Al-Shammari, B. (2015). Ownership concentration, ownership composition and the performance of the Kuwaiti listed non-financial firms. International Journal of Commerce and Management, 25(1), 108–132. https://doi.org/10.1108/IJCOMA-07-2013-0065
[5] Altman, E. I. (1968). FINANCIAL RATIOS, DISCRIMINANT ANALYSIS AND THE PREDICTION OF CORPORATE BANKRUPTCY. The Journal of Finance, 23(4), 589–609. https://doi.org/10.1111/j.1540-6261.1968.tb00843.x
[6] Beaver, W. H. (1966). Financial Ratios As Predictors of Failure. Journal of Accounting Research, 4, 71. https://doi.org/10.2307/2490171
[7] Boshnak, H. A., Alsharif, M., & Alharthi, M. (2023). Corporate governance mechanisms and firm performance in Saudi Arabia before and during the COVID-19 outbreak. Cogent Business & Management, 10(1), 2195990. https://doi.org/10.1080/23311975.2023.2195990
[8] Dilipkumar Suthar. (2023a). SHINING A LIGHT ON FINANCIAL TRANSPARENCY: BIBLIOMETRIC INSIGHTS INTO SEGMENT REPORTING. EPRA International Journal of Multidisciplinary Research (IJMR), 180–188. https://doi.org/10.36713/epra14404
[9] Dilipkumar Suthar. (2023b). UNVEILING THE DYNAMICS OF SEGMENT REPORTING: A SYSTEMATIC LITERATURE REVIEW. EPRA International Journal of Economic and Business Review, 38–46. https://doi.org/10.36713/epra14461
[10] Donaldson, L., & Davis, J. (1991). Stewardship Theory or Agency Theory. Journal of Management, 16, 49–64. http://dx.doi.org/10.1177/031289629101600103
[11] Fachrudin, K. A. (2021). Insolvency and financial health prediction model for the listed companies on the Indonesia Stock Exchange. Jurnal Akuntansi & Auditing Indonesia, 25(1), 24–32. https://doi.org/10.20885/jaai.vol25.iss1.art3
[12] Fama, E. F., & Jensen. (1983). Separation of Ownership and Control.
[13] Fernando, J. M. R., Li, L., & Hou, Y. (Greg). (2019). Corporate governance and default prediction: A reality test. Applied Economics, 51(24), 2669–2686. https://doi.org/10.1080/00036846.2018.1558351
[14] Habib, A., Costa, M. D., Huang, H. J., Bhuiyan, Md. B. U., & Sun, L. (2020). Determinants and consequences of financial distress: Review of the empirical literature. Accounting & Finance, 60(S1), 1023–1075. https://doi.org/10.1111/acfi.12400
[15] Jain, S., Sharma, P. P., Suthar, D., Maheria, S., & Vaghela, J. (2020). THE ANALOGY OF SUSTAINABLE COMPETITIVENESS OF SAARC AND G-SEVEN NATIONS. Towards Excellence, 185–203. https://doi.org/10.37867/TE140118
[16] Jensen, & Meckling. (1976). Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure.
[17] Kanoujiya, J., Singh, K., & Rastogi, S. (2023). Does promoters’ ownership reduce the firm’s financial distress? Evidence from non-financial firms listed in India. Managerial Finance, 49(4), 643–660. https://doi.org/10.1108/MF-05-2022-0220
[18] Kholisoh, S. N., & Dwiarti, R. (2020). The Analysis of Fundamental Variables and Macro Economic Variables in Predicting Financial Distress. Management Analysis Journal, 9(1), 81–90. https://doi.org/10.15294/maj.v9i1.36395
[19] Lin, C.-H., Yang, H.-L., & Liou, D.-Y. (2009). The impact of corporate social responsibility on financial performance: Evidence from business in Taiwan. Technology in Society, 31(1), 56–63. https://doi.org/10.1016/j.techsoc.2008.10.004
[20] Mondal, A., & Roy, D. (2013). Financial Indicators of Corporate Sickness: A Study of Indian Steel Industry. South Asian journal of management, 20, 85. South Asian Journal of Management, 20, 85.
[21] Mukherjee, T., & Sen, S. S. (2022). Impact of CEO attributes on corporate reputation, financial performance, and corporate sustainable growth: Evidence from India. Financial Innovation, 8(1), 40. https://doi.org/10.1186/s40854-022-00344-7
[22] Nair, J. J., & Sachdeva, J. K. (2016). Indicators of financial distress—An empirical study of Indian Textile sector. Journal of Global Economy, 12(2), 101–110. https://doi.org/10.1956/jge.v12i2.418
[23] Platt, H. D., & Platt, M. B. (n.d.). UNDERSTANDING DI ERENCES BETWEEN INANCIAL DISTRESS AND BANKRUPTCY.
[24] Rastogi, S., & Kanoujiya, J. (2022). Corporate disclosures and financial distress in banks in India: The moderating role of competition. Asian Review of Accounting, 30(5), 691–712. https://doi.org/10.1108/ARA-03-2022-0064
[25] RBI. (2018). Financial Stability Report – June 2018 (pp. 19–25). Reserve Bank of India. https://www.rbi.org.in.
[26] Restianti, T., & Agustina, L. (2018). The effect of financial ratios on financial distress conditions in sub-industrial sector companies. Accounting Analysis Journal, 7(1), 25–33. https://doi.org/10.15294/aaj.v5i3.18996
[27] Saeed, A., Ali, Q., Riaz, H., & Khan, M. A. (2022). Audit Committee Independence and Auditor Reporting for Financially Distressed Companies: Evidence From an Emerging Economy. Sage Open, 12(2), 21582440221089951. https://doi.org/10.1177/21582440221089951
[28] Saji, T. G. (2018). Financial Distress and Stock Market Failures: Lessons from Indian Realty Sector. Vision: The Journal of Business Perspective, 22(1), 50–60. https://doi.org/10.1177/0972262917750244
[29] SEBI. (2017). Committee on Corporate Governance Report 2017. SEBI.
[30] SEBI. (2022). Securities and Exchange Board of India. (2022).
[31] Sharma, M. P., Suthar, D., & Suhaag Maheria. (2021). ARTIFICIAL INTELLIGENCE ACCOUNTING TECHNOLOGY – PERCEPTION AND ACCEPTANCE. Social Sciences.
[32] Sharma, P. P., & Suthar, D. (2020). Indian Global Leadership in Enforced Lockdown: Blossoming Industrial & Agricultural Opportunities Would Make India a Superpower. Kaav International Journal of Economics , Commerce & Business Management, 7(2).
[33] Shleifer, A., & Vishny, R. W. (1986). Large Shareholders and Corporate Control. Journal of Political Economy, 94(3), 461–488.
[34] Shleifer, A., & Vishny, R. W. (1997). A Survey of Corporate Governance.
[35] Singh, K., & Rastogi, S. (2022). Financial Distress, COVID-19 and Listed SMEs: A Multi-methodology Approach. Vision: The Journal of Business Perspective, 09722629221096055. https://doi.org/10.1177/09722629221096055
[36] Singh, P., & Chakraborty, A. (2023). How Indian Pharma Industry Performed in the Last Decade? Impact of a Non-macroeconomic Variable and Financial Distress. Jindal Journal of Business Research, 12(2), 143–159. https://doi.org/10.1177/22786821231166792
[37] Suthar, D. K., Negussie, D., Vaghela, J., Parmar, N., & Rahevar, M. (2024). Unveiling Multifaceted Impacts Of Crowdfunding In Finance, Innovation, And Sustainability – Systematic Literature Review.
[38] Vibhakara, N. N., Tripathi, K. K., Johari, S., & Jha, K. N. (2023). Identification of significant financial performance indicators for the Indian construction companies. International Journal of Construction Management, 23(1), 13–23. https://doi.org/10.1080/15623599.2020.1844856
[39] Wang, Z.-J., & Deng, X.-L. (2006). Corporate Governance and Financial Distress: Evidence from Chinese Listed Companies. The Chinese Economy, 39(5), 5–27. https://doi.org/10.2753/CES1097-1475390501
[40] Waqas, H., & Md-Rus, R. (2018). Predicting financial distress: Importance of accounting and firm-specific market variables for Pakistan’s listed firms. Cogent Economics & Finance, 6(1), 1545739. https://doi.org/10.1080/23322039.2018.1545739
Downloads
Published
Issue
Section
License
Copyright (c) 2025 International Journal of Management, Public Policy and Research
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
