Financial stress signals in Philippine corporates
Growth‑stage companies rarely collapse overnight; distress builds quietly. Recent market data illustrate why Philippine executives cannot rely on outdated financial statements alone. Analysis of companies listed on the Philippine Stock Exchange shows that the median MV/TL ratio has fallen from 2.42 (2019) to 1.05, and the share of firms trading below the value of their liabilities has jumped to 48.8 %. In other words, nearly half of the market has no market‑value cushion—a stark warning for counterparties and boards.
Financial stress also ripples through supply chains. In September 2025, Super Typhoon Ragasa battered northern Luzon, forcing flight cancellations and port closures in Cagayan and Ilocos and disrupting trucking and freight operations. These climate‑driven bottlenecks exposed overreliance on single suppliers and fragile logistics networks. When a strategic vendor falters—whether due to weather, debt or weak liquidity—operations stall and costs surge. Boards would be prudent to treat climate risk as supply‑chain risk so that plans are in place before the next storm.
The steep drop in MV/TL ratios reflects a shift in investor sentiment. As the PSE index fell about 10.9%, the share of companies with MV/TL ratios above 2.0 slid from 53.3% to 35.7%. Fewer strong firms mean more are operating with little market‑value cushion: the proportion with ratios below 1.0 jumped from 31.1% to 48.8%. This distribution suggests that even modest disruptions—like higher interest rates or weaker demand—could push more companies toward default.
Even blue‑chip names aren’t immune. About ten index heavyweights—representing about 38.5% of the PSE index excluding banks—now sit below the 1.0 threshold. Falling valuations, tighter margins and rising debt burdens are squeezing market leaders. Boards should therefore form cross‑functional risk committees and weave financial and supply‑chain stress tests into their planning.
Resilience is also built on relationships. Forward‑looking boards collaborate with procurement to flag bottlenecks early, maintain dialogue with at‑risk suppliers and, when possible, offer support—such as flexible terms or technical assistance—to prevent a partner’s distress from cascading. Coupling these tactics with market signals and climate‑risk mapping helps supply chains absorb shocks.
What should executives monitor? Beyond traditional debt‑to‑equity metrics, market‑based indicators like the MV/TL ratio flag stress before it appears in financial statements. Liquidity ratios (current and quick) reveal whether vendors can meet short‑term obligations; values below 1 signal trouble. Monitoring profit margins and leverage trends adds context to market signals. In tandem, supply‑chain teams should map critical vendors and assign thresholds—such as flagging partners whose MV/TL ratio drops below 1 or whose current ratio slips under 1.0. Finally, factor in climate‑related vulnerabilities: does a vendor operate in typhoon‑prone regions or rely on single transport corridors?
Governance questions to ask: Are we tracking vendors’ market‑value‑to‑liabilities ratios and liquidity in real time? Do we know which suppliers are critical and have contingency plans if they fail? How will our operations cope if a typhoon closes key ports for several days? Are we coordinating risk assessments across procurement, finance and operations teams? When nearly half of listed companies have little market‑value cushion, boards would be prudent not to ignore these signals.
Decision‑readiness: Preparing for financial and operational stress means centralising data on counterparties, implementing dashboards that update market and liquidity metrics continuously, and establishing back‑up suppliers and logistics routes. Since SMEs account for 63 % of employment and 36 % of gross value added in the Philippines but struggle to access finance, many will need support when stress emerges. Governance should ensure escalation paths and decision rights are clear so that intervention is swift and coordinated.
If financial stress is becoming a constraint, we can review how you currently assess counterparties/borrowers in a short call. Book a discovery call.
