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Fostering SME survival through insolvency proceedings: a legitimacy perspective on retrenchment, age, and firm-specific distress

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  • Rachid Achbah

    (UL2 UFR SEG - Université Lumière - Lyon 2 - UFR de Sciences économiques et de gestion - UL2 - Université Lumière - Lyon 2, COACTIS - COnception de l'ACTIon en Situation - UL2 - Université Lumière - Lyon 2 - UJM - Université Jean Monnet - Saint-Étienne)

  • Marc Fréchet

    (UJM - Université Jean Monnet - Saint-Étienne, COACTIS - COnception de l'ACTIon en Situation - UL2 - Université Lumière - Lyon 2 - UJM - Université Jean Monnet - Saint-Étienne)

Abstract

This study examines the interaction between insolvency proceedings and strategic variables and their relationship with firm survival. Unlike previous research, this study considers the firm's legal status, including insolvency proceedings, and fills a gap in the literature by considering legal considerations in business studies. Adopting a legitimacy perspective, we employ a Cox proportional hazards model to construct a survival model based on a theoretical framework encompassing insolvency proceedings retrenchment, firm age, and causes of financial distress. Our sample consists of French SMEs facing financial difficulties. The findings reveal that initiating insolvency proceedings is negatively associated with firm survival. However, retrenchment of employees or assets during insolvency proceedings is associated with a higher likelihood of survival. Contrary to expectations, firm age showed a negative association with firm survival during the insolvency proceedings. Moreover, the study revealed a positive association between insolvency proceedings and firm survival in cases of firm-specific financial distress. This research provides new insights into the relationship between insolvency proceedings and firm survival.

Suggested Citation

  • Rachid Achbah & Marc Fréchet, 2024. "Fostering SME survival through insolvency proceedings: a legitimacy perspective on retrenchment, age, and firm-specific distress," Post-Print hal-04480487, HAL.
    • Handle: RePEc:hal:journl:hal-04480487
    DOI: 10.1007/s11187-024-00874-7
    Note: View the original document on HAL open archive server: https://hal.science/hal-04480487
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    References listed on IDEAS

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    1. Fisher, Greg & Kuratko, Donald F. & Bloodgood, James M. & Hornsby, Jeffrey S., 2017. "Legitimate to whom? The challenge of audience diversity and new venture legitimacy," Journal of Business Venturing, Elsevier, vol. 32(1), pages 52-71.
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    Keywords

    SMEs; Insolvency proceedings; Legitimacy; Retrenchment; Firm survival; SMEs Insolvency proceedings Legitimacy Retrenchment Firm Survival; Firm Survival;
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