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Determinants and consequences of financial distress: review of the empirical literature

Author

Listed:
  • Ahsan Habib
  • Mabel D' Costa
  • Hedy Jiaying Huang
  • Md. Borhan Uddin Bhuiyan
  • Li Sun

Abstract

We synthesise the empirical literature on the determinants and consequences of financial distress, critique the findings and offer suggestions for future research. We categorise these indicators into (i) firm‐level fundamental determinants, (ii) macroeconomic determinants and (iii) firm‐level corporate governance determinants. We categorise the consequences into (i) financial reporting and auditing consequences, (ii) firm‐level operational consequences, (iii) capital market consequences and (iv) corporate governance consequences. We suggest that future research can make a more meaningful contribution, by developing more comprehensive models of predicting financial distress which will entail a departure from the current partial analysis to a more holistic complex analysis.

Suggested Citation

  • Ahsan Habib & Mabel D' Costa & Hedy Jiaying Huang & Md. Borhan Uddin Bhuiyan & Li Sun, 2020. "Determinants and consequences of financial distress: review of the empirical literature," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(S1), pages 1023-1075, April.
  • Handle: RePEc:bla:acctfi:v:60:y:2020:i:s1:p:1023-1075
    DOI: 10.1111/acfi.12400
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