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Regional Disparities and Spatial Dependence of Bankruptcy in Spain

Author

Listed:
  • Manuel Rico

    (Department of Management, University of Valencia, 46020 Valencia, Spain)

  • Santiago Cantarero

    (Department of Management, University of Valencia, 46020 Valencia, Spain)

  • Francisco Puig

    (Department of Management, University of Valencia, 46020 Valencia, Spain)

Abstract

Firm survival, bankruptcy, and turnaround are of great interest nowadays. Bankruptcy is the ultimate resource for a company to survive when it is affected by a severe decline. Thus, determinants of firm turnaround and survival in the context of bankruptcy are of interest to researchers, managers, and policy-makers. Prior turnaround literature has broadly studied firm-specific factors for turnaround success. However, location-specific factors remain relatively unstudied despite their increasing relevance. Thus, this paper aims to evaluate the existence of spatial dependence on the outcome of the bankruptcy procedure. Economic geography and business literature suggest that location matters and closer companies behave similarly to further ones. For this purpose, we designed a longitudinal analysis employing spatial correlation techniques. The analyses were conducted on a sample of 862 Spanish bankrupt firms (2004–2017) at a regional level (province). For overcoming the limitations of the broadly usually logistic model employed for the turnaround context, the Moran’s Index and the Local Association Index (LISA) were applied with gvSIG and GeoDa software. The empirical results show that the predictors GDP per capita and manufacturing specialization are related to higher bankruptcy survival rates. Both characteristics tend to be present in the identified cluster of provinces with better outcomes located in the North of Spain. We suggest that location broadly impacts the likelihood of the survival of a bankrupt firm, which can condition the strategic decision of locating in one region or another. Our findings provide policy-makers, managers, and researchers with relevant contributions and future investigation lines.

Suggested Citation

  • Manuel Rico & Santiago Cantarero & Francisco Puig, 2021. "Regional Disparities and Spatial Dependence of Bankruptcy in Spain," Mathematics, MDPI, vol. 9(9), pages 1-20, April.
  • Handle: RePEc:gam:jmathe:v:9:y:2021:i:9:p:960-:d:543143
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    References listed on IDEAS

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    Cited by:

    1. Hao-Chen Huang & Hsin-Yin Chang & Ting-Hsiu Liao, 2023. "Analyzing the Impact of the Labor Market on Company Location Selection Using Spatial Econometric Models," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 13(6), pages 1-9.
    2. Tzung Hsuen Khoo & Dharini Pathmanathan & Sophie Dabo-Niang, 2023. "Spatial Autocorrelation of Global Stock Exchanges Using Functional Areal Spatial Principal Component Analysis," Mathematics, MDPI, vol. 11(3), pages 1-24, January.

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