The 2011 floods’ impact on the Thai industrial estates’ financial stability: a ratio analysis with policy recommendations

This paper employs ratio analysis to investigate the financial stability of companies located in seven of Thailand’s industrial estates following the 2011 floods. Those seven industrial estates contain 651 companies. Ranked by size, they are: (1) Rojana; (2) Navanakorn; (3) Hi-Tech; (4) Bang Pa-in; (5) Factory Land; (6) Saharattananakhon; and (7) Bangkadi Industrial Estates. All of them were hit particularly hard by flooding in 2011. After omitting 75 companies that failed to report their financial statements, 43 companies that closed down after the floods, and 19 companies that first registered businesses after 2011, 514 companies (78.96% of the total number of companies on the 7 industrial estates) were selected and included in this study. Its objective is to investigate the financial stability of those companies after the floods and to see how quickly they were able to recover from the disaster. The sample’s financial data were divided into two different periods: the flood year (2011) and post-flood years (2012–2015). After reviewing commonly used indicators, 12 financial ratios were selected to measure changes in the companies’ post-flood financial position. We tested the normality of the data and decided to employ a nonparametric independent test at 90%, 95%, and 99% confidence intervals. To our surprise, the key finding of this paper is that the leverage and, to a certain extent, the liquidity of the affected companies did not constitute issues for them. Their current ratios and working capital ratios looked fine statistically. However, due to the cessation of production during the flooding, they lacked deliverable inventories. As a result, these companies faced inventory and accounts receivable problems. The historic floods also affected the profitability of the companies, making 2011 the year with the markedly lowest profitability during the 2011–2015 period.