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Predicting Firm Failure: A Behavioral Finance Perspective


  • Rassoul Yazdipour

    (California State University, Fresno)

  • Richard Constand

    (University of West Florida)


In this article we first argue that researchers in the area of financial distress and failure cannot ignore the human/managerial/decision-making side of the business and just focus on the business' operations side; as has been the case so far for almost all the research in the area. We then discuss how psychological phenomena and principles, known as heuristics or mental shortcuts, could be utilized in building more powerful success/failure prediction models especially for small and medium sized enterprises (SMEs).

Suggested Citation

  • Rassoul Yazdipour & Richard Constand, 2010. "Predicting Firm Failure: A Behavioral Finance Perspective," Journal of Entrepreneurial Finance, Pepperdine University, Graziadio School of Business and Management, vol. 14(3), pages 90-104, Fall.
  • Handle: RePEc:pep:journl:v:14:y:2010:i:3:p:90-104

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    References listed on IDEAS

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    Cited by:

    1. Linda Bergset, 2015. "The Rationality and Irrationality of Financing Green Start-Ups," Administrative Sciences, MDPI, Open Access Journal, vol. 5(4), pages 1-26, November.

    More about this item


    Bankruptcy; Firm Failure; Behavioral Finance; Behavioral Economics; Distress;

    JEL classification:

    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups


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