Operating or Financial Distress? How much Costly these are?

Current study intended to explore the cost of financial distress for Pakistani manufacturing ongoing firms listed at KSE. In doing so, financial distress is divided into operating distress and financial but not operating distress. Sample consists of ongoing firms that were at least once in distressed counter for the period of analysis. Independent t-test, parametric and non-parametric correlation analysis and GLM regression analyses are used to conclude proposed models. It is found that firms borne opportunity losses before and after entering to both operating and financial distress. Moreover, results also show that operating distress affects more severely to firms’ value as compared to financial but not operating distress category. However, result for pre financial but not operating distress is found insignificant. On the other hand organizational efficiencies are also evidenced in post year to distress. In short current study provides opportunity to all stakeholders to assess firms’ performances before and after entering to both operating and financial distress.