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Financial and Economic Determinants of Firm Default

  • Giulio Bottazzi

    ()

    (LEM - Laboratory of Economics and Management - Sant'Anna School of Advanced Studies)

  • Marco Grazzi

    (LEM - Laboratory of Economics and Management - Sant'Anna School of Advanced Studies)

  • Angelo Secchi

    ()

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

  • Federico Tamagni

    (LEM - Laboratory of Economics and Management - Sant'Anna School of Advanced Studies)

This paper investigates the relevance of financial and economic variables as determinants of firm default. Our analysis cover a large sample of medium-sized limited liability firms. Since default might lead, through bankruptcy or radical restructuring, to firm's exit, our work also relates with previous contributions on industrial demography. Using non parametric tests we assess to what extent defaulting firms differ from the non-defaulting group. Bootstrap probit regressions confirm that economic variables, in addition to standard financial indicators, play both a long and short term effect. Our findings are robust with respect to the inclusion of Distance to Default and risk ratings among the regressors.

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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number hal-00642699.

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Date of creation: 2011
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Publication status: Published in Journal of Evolutionary Economics, Springer Verlag (Germany), 2011, pp.373
Handle: RePEc:hal:cesptp:hal-00642699
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