Construction firms at the crossroads in Hong Kong: Going insolvency or seeking opportunity

Abstract

Purpose

To assist contractors in Hong Kong to review their past financial performance and to formulate new strategies for their business survival in the coming years.

Design/methodology/approach

The financial accounting ratios and distress scoring are very useful tools to measure the financial performance. These tools are also useful to compare the performance among themselves and over the years. The mathematical analysis together with a review of the current business environment and the characteristics of construction industry will assist contractors in Hong Kong to formulate new strategies for their own business survival in the coming years.

Findings

The results have shown that the financial performance of most contractors in Hong Kong have been deteriorating very fast in the past few years. The results of all financial ratios, together with the prevailing situation of over competition, inelasticity of construction costs and reduced aggregate demand in Hong Kong, has revealed the extreme difficulty of reversing the financial performance in the coming years.

Originality/value

Contractors in Hong Kong now understand that their own financial performance have been deteriorating to an alarming limit. There is an urgent need to review their business environment and to formulate new corporate strategies.

Citation

Chan, J.K.W., Tam, C.M. and Cheung, R.K.C. (2005), "Construction firms at the crossroads in Hong Kong: Going insolvency or seeking opportunity", Engineering, Construction and Architectural Management, Vol. 12 No. 2, pp. 111-124. https://doi.org/10.1108/09699980510584476