The relationship between bankruptcy risk and growth for non-listed firms
AbstractWe investigate the relationship between bankruptcy risk and expected future sales growth for Norwegian non-listed firms for the period 1988-2007. We find that firms with high bankruptcy risk also have high expected future growth. Financial ratios characterizing firms with high bankruptcy risk also characterize firms with high future expected growth. Small firms, firms with low levels of equity and retained earnings, firms with low profitability and low levels of sales per unit of capital, have all higher expected future growth rates than other firms. These findings suggest a tradeoff between the upside potential of high growth and the downside risk of bankruptcy.
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Bibliographic InfoPaper provided by Norges Bank in its series Working Paper with number 2010/31.
Length: 30 pages
Date of creation: Dec 2010
Date of revision:
Non-listed firms; growth; bankruptcy risk;
Other versions of this item:
- Nordal, Kjell Bjorn & Naes, Randi, 2010. "The relationship between bankruptcy risk and growth for non-listed firms," UiS Working Papers in Economics and Finance 2010/10, University of Stavanger.
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
- G30 - Financial Economics - - Corporate Finance and Governance - - - General
- G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-01-23 (All new papers)
- NEP-BAN-2011-01-23 (Banking)
- NEP-BEC-2011-01-23 (Business Economics)
- NEP-ENT-2011-01-23 (Entrepreneurship)
- NEP-FDG-2011-01-23 (Financial Development & Growth)
- NEP-RMG-2011-01-23 (Risk Management)
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