Firm failure patterns: the interconnection of failure reasons and financial data

Abstract

Decades of research has resulted in multifaceted studies on firm failure, being mainly focused on forecasting failure using financial data. Several studies are also viewing failure reasons and financial patterns of failure, but literature lacks of empirical studies connecting two aspects - failure reasons and pre-failure financial data. Using the dataset of all Estonian bankrupt firms from 2002 to 2009 distinct firm failure patterns are outlined. Specifically, perceived bankruptcy causes are aggregated and linked to changes in pre-bankruptcy financial data.