The Determinants of Credit Risk in Malaysia

The aims of this study are to investigate the determinants of credit risk and to examine the impact of earnings management on credit risk prediction. The results showed that the liquidity ratio was significant in determining credit risk before and after earnings management was adjusted. Meanwhile, the productivity ratio was significant in the unadjusted model, while the profitability ratio was significant in the adjusted model. The overall percentage of correct prediction showed that the unadjusted model predicted better than the adjusted model. This study provides knowledge about the effect of earning management on bankruptcy prediction.