IDEAS home Printed from https://ideas.repec.org/a/ibn/ijbmjn/v19y2024i5p85.html

Probability of Corporate Bankruptcy over Two Periods of Crisis (2007-2010 vs 2019-2022): Application to Italian Manufacturing SMEs Using a Three Years Rating Model

Author

Listed:
  • Marco Muscettola

Abstract

Predicting corporate insolvencies over the last three years is more complex than in the past. An empirical analysis of a sample of 2,823 SMEs operating in Northern Italy in the manufacturing sector, shows that the logistic function created to discriminate the firms that became insolvent after three years, has a lower level of accuracy when it’s built over the last period of crisis (2019-2022). The companies that entered into default status in 2022, therefore, had, three years earlier, a greater volatility of the averages of financial ratios such as to induce greater misclassifications in a hypothetical statistical forecasting model. The study compares the global financial crisis during years between 2008-2012, which had the highest peak of insolvency in 2010/2011, with the current global crisis that began with the COVID19 pandemic and has continued with the war in Ukraine and related problem of price increases. The analysis aims to detect the differences between firms of 2019 that became insolvent in 2022 compared to a previous crisis period (2007-2010).

Suggested Citation

  • Marco Muscettola, 2024. "Probability of Corporate Bankruptcy over Two Periods of Crisis (2007-2010 vs 2019-2022): Application to Italian Manufacturing SMEs Using a Three Years Rating Model," International Journal of Business and Management, Canadian Center of Science and Education, vol. 19(5), pages 1-85, September.
    • Handle: RePEc:ibn:ijbmjn:v:19:y:2024:i:5:p:85
    as

    Download full text from publisher

    File URL: https://ccsenet.org/journal/index.php/ijbm/article/download/0/0/50505/54704
    Download Restriction: no
    File URL: https://ccsenet.org/journal/index.php/ijbm/article/view/0/50505
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Marco Muscettola, 2019. "Distinctiveness of Highly Risky Italian Firms That are Saved-A Logistic Approach," Applied Economics and Finance, Redfame publishing, vol. 6(1), pages 64-73, January.
    2. Iyer, Subramanian Rama & Simkins, Betty J., 2022. "COVID-19 and the Economy: Summary of research and future directions," Finance Research Letters, Elsevier, vol. 47(PB).
    3. Marco Cucculelli & Valentina Peruzzi, 2020. "Post-crisis firm survival, business model changes, and learning: evidence from the Italian manufacturing industry," Small Business Economics, Springer, vol. 54(2), pages 459-474, February.
    4. Dimitris Papanikolaou & Lawrence D W Schmidt, 2022. "Working Remotely and the Supply-Side Impact of COVID-19 [The unprecedented stock market reaction to COVID-19]," The Review of Asset Pricing Studies, Society for Financial Studies, vol. 12(1), pages 53-111.
    5. Huayu Shen & Mengyao Fu & Hongyu Pan & Zhongfu Yu & Yongquan Chen, 2020. "The Impact of the COVID-19 Pandemic on Firm Performance," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 56(10), pages 2213-2230, August.
    6. Doerr, S. & Erdem, M. & Franco, G. & Gambacorta, L. & Illes, A., 2021. "Technological capacity and firms’ recovery from Covid-19," Economics Letters, Elsevier, vol. 209(C).
    7. Zhang, Dayong & Hu, Min & Ji, Qiang, 2020. "Financial markets under the global pandemic of COVID-19," Finance Research Letters, Elsevier, vol. 36(C).
    8. Edward I. Altman & Brooks Brady & Andrea Resti & Andrea Sironi, 2005. "The Link between Default and Recovery Rates: Theory, Empirical Evidence, and Implications," The Journal of Business, University of Chicago Press, vol. 78(6), pages 2203-2228, November.
    9. Marco Muscettola, 2015. "Difficulties for small firms to invest in research prerogatives. An empirical analysis of a sample of Italian firms," Applied Economics, Taylor & Francis Journals, vol. 47(15), pages 1495-1510, March.
    10. Zhang, Xuan & Ouyang, Ruolan & Liu, Ding & Xu, Liao, 2020. "Determinants of corporate default risk in China: The role of financial constraints," Economic Modelling, Elsevier, vol. 92(C), pages 87-98.
    11. Erdem, Orhan, 2020. "Freedom and stock market performance during Covid-19 outbreak," Finance Research Letters, Elsevier, vol. 36(C).
    12. Massimiliano Affinito & Giorgio Meucci, 2023. "Return of the NPLs to the Bright Side: Which Unlikely to Pay Firms are More Likely to Pay?," Quarterly Journal of Finance (QJF), World Scientific Publishing Co. Pte. Ltd., vol. 13(02), pages 1-48, June.
    13. Huayu Shen & Mengyao Fu & Hongyu Pan & Zhongfu Yu & Yongquan Chen, 2020. "The Impact of the COVID-19 Pandemic on Firm Performance," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 56(10), pages 2213-2230, August.
    14. Robert Fairlie & Frank M. Fossen, 2022. "The early impacts of the COVID-19 pandemic on business sales," Small Business Economics, Springer, vol. 58(4), pages 1853-1864, April.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Fasano, Francesco & Javier Sánchez-Vidal, F. & La Rocca, Maurizio, 2022. "The role of government policies for Italian firms during the COVID-19 crisis," Finance Research Letters, Elsevier, vol. 50(C).
    2. Padhan, Rakesh & Prabheesh, K.P., 2021. "The economics of COVID-19 pandemic: A survey," Economic Analysis and Policy, Elsevier, vol. 70(C), pages 220-237.
    3. Narayan, Paresh Kumar & Devpura, Neluka & Wang, Hua, 2020. "Japanese currency and stock market—What happened during the COVID-19 pandemic?," Economic Analysis and Policy, Elsevier, vol. 68(C), pages 191-198.
    4. Lin, Hang & Zhang, Zhengjun, 2022. "Extreme co-movements between infectious disease events and crude oil futures prices: From extreme value analysis perspective," Energy Economics, Elsevier, vol. 110(C).
    5. Naidu, Dharmendra & Ranjeeni, Kumari, 2021. "Effect of coronavirus fear on the performance of Australian stock returns: Evidence from an event study," Pacific-Basin Finance Journal, Elsevier, vol. 66(C).
    6. Narayan, Paresh Kumar & Phan, Dinh Hoang Bach & Liu, Guangqiang, 2021. "COVID-19 lockdowns, stimulus packages, travel bans, and stock returns," Finance Research Letters, Elsevier, vol. 38(C).
    7. Deng, Tianjie & Xu, Tracy & Lee, Young Jin, 2022. "Policy responses to COVID-19 and stock market reactions - An international evidence," Journal of Economics and Business, Elsevier, vol. 119(C).
    8. Fei Su & Feifan Wang & Yahua Xu, 2025. "Economic Policy Uncertainty and Volatility Spillovers Among International Stock Market Indices During the COVID-19 Outbreak," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 32(1), pages 237-266, March.
    9. Umar, Zaghum & Manel, Youssef & Riaz, Yasir & Gubareva, Mariya, 2021. "Return and volatility transmission between emerging markets and US debt throughout the pandemic crisis," Pacific-Basin Finance Journal, Elsevier, vol. 67(C).
    10. Lizheng Ma & Congzhi Zhang & Kai Lisa Lo & Xiangyan Meng, 2023. "Can Stringent Government Initiatives Lead to Global Economic Recovery Rapidly during the COVID-19 Epidemic?," IJERPH, MDPI, vol. 20(6), pages 1-16, March.
    11. Kaya, Orcun, 2022. "Determinants and consequences of SME insolvency risk during the pandemic," Economic Modelling, Elsevier, vol. 115(C).
    12. Song, Pengcheng & Ma, Xinxin & Zhang, Xuan & Zhao, Qin, 2021. "The influence of the SARS pandemic on asset prices," Pacific-Basin Finance Journal, Elsevier, vol. 67(C).
    13. Xiangyu Chen & Jittima Tongurai & Pattana Boonchoo, 2024. "Revisiting China’s Commodity Futures Market Amid the Main Waves of COVID-19 Pandemics," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 31(4), pages 1035-1063, December.
    14. Harjoto, Maretno Agus & Rossi, Fabrizio & Lee, Robert & Sergi, Bruno S., 2021. "How do equity markets react to COVID-19? Evidence from emerging and developed countries," Journal of Economics and Business, Elsevier, vol. 115(C).
    15. Anastasiou, Dimitris & Ballis, Antonis & Drakos, Konstantinos, 2022. "Constructing a positive sentiment index for COVID-19: Evidence from G20 stock markets," International Review of Financial Analysis, Elsevier, vol. 81(C).
    16. Bannigidadmath, Deepa & Narayan, Paresh Kumar & Phan, Dinh Hoang Bach & Gong, Qiang, 2022. "How stock markets reacted to COVID-19? Evidence from 25 countries," Finance Research Letters, Elsevier, vol. 45(C).
    17. Chebbi, Kaouther & Ammer, Mohammed Abdullah & Hameed, Affan, 2021. "The COVID-19 pandemic and stock liquidity: Evidence from S&P 500," The Quarterly Review of Economics and Finance, Elsevier, vol. 81(C), pages 134-142.
    18. Doruk, Ömer Tuğsal & Konuk, Serhat & Atici, Rümeysa, 2021. "Short-term working allowance and firm risk in the post-COVID-19 period: Novel matching evidence from an emerging market," Finance Research Letters, Elsevier, vol. 43(C).
    19. Ren, Zhaomin & Zhang, Xuan & Zhang, Zhekai, 2021. "New evidence on COVID-19 and firm performance," Economic Analysis and Policy, Elsevier, vol. 72(C), pages 213-225.
    20. Ștefan Cristian Gherghina & Daniel Ștefan Armeanu & Camelia Cătălina Joldeș, 2020. "Stock Market Reactions to COVID-19 Pandemic Outbreak: Quantitative Evidence from ARDL Bounds Tests and Granger Causality Analysis," IJERPH, MDPI, vol. 17(18), pages 1-35, September.

    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ibn:ijbmjn:v:19:y:2024:i:5:p:85. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Canadian Center of Science and Education (email available below). General contact details of provider: https://edirc.repec.org/data/cepflch.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.