Financial and Economic Determinants of Firm Default

Giulio Bottazzi (1) , Marco Grazzi (1) , Angelo Secchi (2) , Federico Tamagni (1)

1 LEM - Laboratory of Economics and Management
2 CES - Centre d'économie de la Sorbonne

This paper investigates the relevance of financial and economic variables as determinants of firm default. Our analysis cover a large sample of medium-sized limited liability firms. Since default might lead, through bankruptcy or radical restructuring, to firm's exit, our work also relates with previous contributions on industrial demography. Using non parametric tests we assess to what extent defaulting firms differ from the non-defaulting group. Bootstrap probit regressions confirm that economic variables, in addition to standard financial indicators, play both a long and short term effect. Our findings are robust with respect to the inclusion of Distance to Default and risk ratings among the regressors.

Mots clés: firm

Domaines: Economies et finances

Giulio Bottazzi, Marco Grazzi, Angelo Secchi, Federico Tamagni. Financial and Economic Determinants of Firm Default. Journal of Evolutionary Economics, 2011, pp.373. ⟨hal-00642699⟩