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Liquidity, probability of bankruptcy and the corporate life cycle: the evidence from Czech Republic

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  • Natalia Mokhova
  • Marek Zinecker

Abstract

The paper is focused on the analysis of liquidity and probability of bankruptcy on the different stages of the corporate life cycle (CLC) as growth, maturity and recession. After the global financial crisis (GFC) of 2007-2008 many companies have appeared at the stage of recession or even bankruptcy. This study examines the financial performances of small- and medium-sized enterprises (SMEs) in Czech Republic at the different stages of corporate life cycle during the period 2006-2010 (which includes the year before financial crisis and after). We find that corporate life cycle influences the relation between bankruptcy probability and liquidity. There is a negative and strong relation between profitability and liquidity at the stage of growth and maturity. In addition, the strong and negative relation is found between coverage ratio and liquidity ratio at the stage of decline. However, there is a weak effect of activity on liquidity at all stages of corporate life cycle.

Suggested Citation

  • Natalia Mokhova & Marek Zinecker, 2013. "Liquidity, probability of bankruptcy and the corporate life cycle: the evidence from Czech Republic," International Journal of Globalisation and Small Business, Inderscience Enterprises Ltd, vol. 5(3), pages 189-208.
  • Handle: RePEc:ids:ijgsbu:v:5:y:2013:i:3:p:189-208
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    Citations

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    Cited by:

    1. Ammar Hussain & Minhas Akbar & Muhammad Kaleem Khan & Ahsan Akbar & Mirela Panait & Marian Catalin Voica, 2020. "When Does Earnings Management Matter? Evidence across the Corporate Life Cycle for Non-Financial Chinese Listed Companies," JRFM, MDPI, vol. 13(12), pages 1-19, December.
    2. Natalia Mokhova & Marek Zinecker, 2016. "Corporate Negative Equity: The Evidence from the European Union," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 64(3), pages 1021-1036.
    3. Ahsan Akbar & Minhas Akbar & Wenjin Tang & Muhammad Azeem Qureshi, 2019. "Is Bankruptcy Risk Tied to Corporate Life-Cycle? Evidence from Pakistan," Sustainability, MDPI, vol. 11(3), pages 1-22, January.
    4. ElBannan, Mona A., 2021. "On the prediction of financial distress in emerging markets: What matters more? Empirical evidence from Arab spring countries," Emerging Markets Review, Elsevier, vol. 47(C).

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