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European country heterogeneity in financial distress prediction: An empirical analysis with macroeconomic and regulatory factors


  • Fernández-Gámez, Manuel Ángel
  • Soria, Juan Antonio Campos
  • Santos, José António C.
  • Alaminos, David


This study tried to improve the understanding of the impact of context variables on the risk of financial difficulties from an European companies experience. To this end, a multilevel logistic model is developed to exploit the benefits of transnational analysis and to examine the effects of contextual factors in countries and the individual impacts of companies within each country. The resulting estimates and the post-estimation analysis based on non-parametric techniques demonstrated that country effects vary randomly but that significant variance exists in the level of financial distress within and between countries. The results also corroborate that companies’ financial variables provide extremely important information. However, the macroeconomic and regulatory factors of the environments in which these companies operate help to explain, to a large extent, the existing heterogeneity among countries.

Suggested Citation

  • Fernández-Gámez, Manuel Ángel & Soria, Juan Antonio Campos & Santos, José António C. & Alaminos, David, 2020. "European country heterogeneity in financial distress prediction: An empirical analysis with macroeconomic and regulatory factors," Economic Modelling, Elsevier, vol. 88(C), pages 398-407.
  • Handle: RePEc:eee:ecmode:v:88:y:2020:i:c:p:398-407
    DOI: 10.1016/j.econmod.2019.09.050

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    More about this item


    Financial distress; Country effect; Multilevel analysis; Macroeconomic factors; Regulatory factors; European countries;
    All these keywords.

    JEL classification:

    • C39 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Other
    • E66 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General Outlook and Conditions
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill


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