Understanding distress and default in Jordanian companies using multiple discriminant analysis

A business may fail because of financial or non-financial reasons but if this failure can be predicted it can be avoided. Thus, it becomes imperative that reasons and variables involved in such failures be studied. This research is focused on default risk and failures in Jordanian companies based on internal factors. The study uses financial data of 49 companies for the time period 2015-2017. The methodology includes qualitative analysis and multi discriminant analysis to analyse and interpret distress and failures in companies. One significant finding from the analysis was that sales, equity capital, retained earnings and debt are good predictor of defaults in companies.