A record percentage of Asian companies are destroying value for their shareholders, in a sign of the increasing strains caused by the region’s slowing economies and as the prospect of higher US interest rates looms.

A total of 38 per cent of companies in the region — excluding Japan — return less on their invested capital than those funds cost them in the first place, according to analysts at CLSA, the regional brokerage. The percentage burning through cash — 13 per cent — is also at a three-year peak, while a fifth are borrowing to pay dividends.

The study, of the 2,500 biggest companies in Asia-Pacific outside Japan, comes as company watchers raise the alarm about the quality of financial reporting, notably in Hong Kong. There, the number of warnings that auditors have made about the health of companies has risen sharply.

The number of profit warnings to the city’s stock exchange is also rising fast, with 1,285 filed so far this year; the highest by this point in the calendar in the eight years for which data are available.

CLSA’s findings were part of a report screening the region’s companies for so-called red flags that could signal issues with the quality of their earnings or balance sheets.

“Asian companies have tended to focus more on top-line growth than profitability,” said Desh Peramunetilleke, head of microstrategy at CLSA, and author of the report, who added that rising US rates were likely to increase the strains companies faced. “Where sales growth is slowing, higher interest rates are the last thing you’d want.”