Files in this item



application/pdf8916287.pdf (16MB)Restricted to U of Illinois
(no description provided)PDF


Title:Strategic and financial factors in business failure, bankruptcy and reorganization
Author(s):Moulton, Wilbur Norton
Doctoral Committee Chair(s):Thomas, Howard
Department / Program:Business Administration
Discipline:Business Administration
Degree Granting Institution:University of Illinois at Urbana-Champaign
Subject(s):Business Administration, Management
Economics, Finance
Abstract:This is a study of financial and strategic factors relating to the failure and bankruptcy of 73 firms that went bankrupt from 1980 to 1986. The characteristics of the bankrupt firms were compared with those of a matching sample of nonbankrupt firms. On average the bankrupt firms were weaker than the comparison firms six years before bankruptcy, but they pursued more aggressive growth strategies. The firms were approximately equally divided between four groups based on firm sales growth or decline and industry growth or decline. The typical decline pattern observed was asset and debt growth followed by decline in profitability. Some firms declined slowly over the entire study period and others collapsed rapidly following a short expansionary period. Of the 73 bankrupt firms, 40 firms were reorganized, but only 12 emerged from bankruptcy at least half their prebankruptcy size. The only significant predictor of successful reorganization was prebankruptcy size. In the course of the study bankruptcy prediction models and statistical classification techniques were extensively reviewed. The Altman bankruptcy model was tested and recalibrated. A new model using only two of the Altman variables, retained earnings as a fraction of total assets and the market value of equity to total liabilities ratio, proved to be an equally powerful predictor of bankruptcy. Theoretical and practical applications of the results are discussed.
Issue Date:1989
Rights Information:Copyright 1989 Moulton, Wilbur Norton
Date Available in IDEALS:2011-05-07
Identifier in Online Catalog:AAI8916287
OCLC Identifier:(UMI)AAI8916287

This item appears in the following Collection(s)

Item Statistics