Title: Exploring the influence of financial and macroeconomic factors on financial distress: insights from service sector firms in India

Authors: Soumya Ranjan Sethi; Dushyant Ashok Mahadik

Addresses: School of Management, National Institute of Technology Rourkela, India ' School of Management, National Institute of Technology Rourkela, India

Abstract: Financial distress is a severe social and economic issue that threatens the stability of firms in any country. The study aims to check the impact of financial variables and macroeconomic factors on financial distress. Additionally, we do sensitivity analysis to determine the important predictors in our study. We have taken 42,900 firm years of non-financial service sector firms of India for the 2012 to 2022 time period. Financial distress is our dependent variable, whereas five important financial ratios and three macroeconomic variables are independent variables. The results found that all the macroeconomic factors are insignificant, but the financial variables significantly impact financial distress. From the sensitivity analysis, we found that the quick ratio is the most important predictor. Since macroeconomic variables do not seem to have much effect on Indian service sector enterprises' financial distress predictions, these companies should place more emphasis on financial variables. The study's findings will help managers, investors, regulatory and corporate agencies, and shareholders in India's service sector companies and all corporate entities in India to manage their interests better.

Keywords: financial distress prediction; logistic regression; sensitivity analysis; macroeconomic factor; forecasting; India.

DOI: 10.1504/IJMFA.2026.154822

International Journal of Managerial and Financial Accounting, 2026 Vol.18 No.3, pp.313 - 342

Received: 19 Jun 2024
Accepted: 21 Sep 2024
Published online: 15 Jul 2026 *

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