Work

Firm failure processes and components of failure risk: An analysis of European bankrupt firms

Year: 2018

Type: article

Abstract: This paper aims to extract firm failure processes (FFPs) by using failure risk and rank the importance of failure risk contributors for different stages of FFPs. The dataset is composed of 1234 bankrupt firms from different European countries and three theoretically motivated FFPs are detected. For the dominant FFP found (73% of cases), failure risk becomes high very shortly before bankruptcy is declared. Annual and accumulated profitability are the most important failure risk contributors for these stages of all FFPs, where failure probability exceeds 50%. The obtained results provide important implications for bankruptcy prediction research and practice, especially in terms of identifying the most important financial predictors.

Source: Journal of Business Research

DOI: 10.1016/j.jbusres.2018.06.025

Authors: Oliver Lukason, Erkki K. Laitinen

Institutions: University of Tartu, University of Vaasa

Language: English

Topic: Financial Distress and Bankruptcy Prediction

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

Open Access status: green

Funders: Eesti Teadusagentuur, Haridus- ja Teadusministeerium

Awards: A holistic process perspective of export patterns: theory development and empirical evidence, G6585673558