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Firm failure prediction for small and medium-sized enterprises and new ventures

Author

Listed:
  • Weiyu Wang

    (Universidade de Lisboa)

  • Maria João Guedes

    (Universidade de Lisboa)

Abstract

New ventures and small and medium-sized enterprises (SMEs) are the engines that drive the development of the economy, productivity, and business. However, they differ with respect to their natures, and that may affect their choices and success. This paper investigates the determinants of failure for SMEs and new ventures in Portugal by employing a logistic regression technique to develop the one-year prediction models individually over the period from 2010 to 2018. The results show that age and size always play significant roles in discriminating the failure risk of both types of firm, but the financial predictors selected in the final default prediction models for SMEs and new ventures vary. Moreover, based on financial, age, and size predictors, the SME model performs much better than that of the new venture in the classification accuracy reported. This indicates that separate treatment should be carried out while predicting the failure likelihood of SMEs and new ventures.

Suggested Citation

  • Weiyu Wang & Maria João Guedes, 2025. "Firm failure prediction for small and medium-sized enterprises and new ventures," Review of Managerial Science, Springer, vol. 19(7), pages 1949-1982, July.
    • Handle: RePEc:spr:rvmgts:v:19:y:2025:i:7:d:10.1007_s11846-024-00742-4
    DOI: 10.1007/s11846-024-00742-4
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    More about this item

    Keywords

    SMEs; New ventures; Failure prediction; Logistic model; Financial distress;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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