From Distress to exit: determinants of the time to exit
This paper analyses the duration of the time to exit of distressed firms, differentiating between involuntary exits (mainly bankruptcies) and voluntary liquidations. It examines how long firms survive after initial signs of economic distress. The study is conducted on an extensive dataset of 5,233 Belgian distress-related exits of non-starting firms, the majority being privately held. The results highlight that slack resources have an opposite effect on the timing of involuntary exits and voluntary liquidations. On the one hand, high levels of available and potential slack increase the time to involuntary exit, as they allow distressed firms to postpone an impending involuntary exit. On the other hand, high available slack resources shorten the time to voluntary liquidation as they make voluntary liquidation easier. Further, a high level of stakeholder dependence increases the time to exit after distress, whether the firm exits through a voluntary or through an involuntary procedure. This is explained by the fact that stakeholder dependence increases the complexity of the exit decision and the exit procedure.
|Date of creation:||18 May 2009|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +32 9 210 98 99
Fax: +32 9 210 97 00
Web page: http://www.vlerick.com
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Steven M. Fazzari & R. Glenn Hubbard & BRUCE C. PETERSEN, 1988.
"Financing Constraints and Corporate Investment,"
Brookings Papers on Economic Activity,
Economic Studies Program, The Brookings Institution, vol. 19(1), pages 141-206.
- Leonardo Becchetti & Jaime Humberto Sierra Gonzalez 2, 2003.
"Bankruptcy Risk and Productive Efficiency in Manufacturing Firms,"
CEIS Research Paper
30, Tor Vergata University, CEIS.
- Becchetti, Leonardo & Sierra, Jaime, 2003. "Bankruptcy risk and productive efficiency in manufacturing firms," Journal of Banking & Finance, Elsevier, vol. 27(11), pages 2099-2120, November.
- Howard S. Rasheed, 2005. "Turnaround Strategies For Declining Small Business: The Effects Of Performance And Resources," Journal of Developmental Entrepreneurship (JDE), World Scientific Publishing Co. Pte. Ltd., vol. 10(03), pages 239-252.
- Klepper, Steven, 1996. "Entry, Exit, Growth, and Innovation over the Product Life Cycle," American Economic Review, American Economic Association, vol. 86(3), pages 562-83, June.
- Christopher F. Baum & Mustafa Caglayan & Andreas Stephan & Oleksandr Talavera, 2006.
"Uncertainty Determinants of Corporate Liquidity,"
Discussion Papers of DIW Berlin
633, DIW Berlin, German Institute for Economic Research.
- Christopher F. Baum & Mustafa Caglayan & Andreas Stephan & Oleksandr Talavera, 2005. "Uncertainty Determinants of Corporate Liquidity," Boston College Working Papers in Economics 634, Boston College Department of Economics, revised 09 Oct 2006.
- Oleksandr Talavera & Christopher Baum & Mustafa Caglayan & Andreas Stephan, 2005. "Uncertainty Determinants of Corporate Liquidity," Money Macro and Finance (MMF) Research Group Conference 2005 73, Money Macro and Finance Research Group.
- Christopher F. Baum & Mustafa Caglayan & Andreas Stephan & Oleksandr Talavera, 2006. "Uncertainty Determinants of Corporate Liquidity," Working Papers 2006_1, Business School - Economics, University of Glasgow.
- Petersen, Mitchell A & Rajan, Raghuram G, 1994. " The Benefits of Lending Relationships: Evidence from Small Business Data," Journal of Finance, American Finance Association, vol. 49(1), pages 3-37, March.
- Hans Degryse & Partick Van cayseele, 1998.
"Relationship Lending within a Bank-based System: Evidence from European Small Business Data,"
Center for Economic Studies - Discussion papers
ces9816, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
- Degryse, Hans & Van Cayseele, Patrick, 2000. "Relationship Lending within a Bank-Based System: Evidence from European Small Business Data," Journal of Financial Intermediation, Elsevier, vol. 9(1), pages 90-109, January.
- Bandopadhyaya, Arindam, 1994. "An Estimation of the Hazard Rate of Firms under Chapter 11 Protection," The Review of Economics and Statistics, MIT Press, vol. 76(2), pages 346-50, May.
- Ozkan, Aydin & Ozkan, Neslihan, 2004. "Corporate cash holdings: An empirical investigation of UK companies," Journal of Banking & Finance, Elsevier, vol. 28(9), pages 2103-2134, September.
- Angeloantonio Russo & Francesco Perrini, 2010. "Investigating Stakeholder Theory and Social Capital: CSR in Large Firms and SMEs," Journal of Business Ethics, Springer, vol. 91(2), pages 207-221, January.
- B. Leyman & K. Schoors & P. Coussement, 2008. "Court-supervised Restructuring: Pre-bankruptcy Dynamics, Debt Structure and Debt Rescheduling," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 08/507, Ghent University, Faculty of Economics and Business Administration.
- Buehler, Stefan & Kaiser, Christian & Jaeger, Franz, 2006.
"Merge or fail? The determinants of mergers and bankruptcies in Switzerland, 1995-2000,"
Elsevier, vol. 90(1), pages 88-95, January.
- Stefan Buehler & Christian Kaiser & Franz Jaeger, 2005. "Merge or Fail? The Determinants of Mergers and Bankruptcies in Switzerland, 1995-2000," SOI - Working Papers 0506, Socioeconomic Institute - University of Zurich.
- Kevin M.J. Kaiser, 1996. "European Bankruptcy Laws: Implications for Corporations Facing Financial Distress," Financial Management, Financial Management Association, vol. 25(3), Fall.
- Gilson, Stuart C. & John, Kose & Lang, Larry H. P., 1990. "Troubled debt restructurings*1: An empirical study of private reorganization of firms in default," Journal of Financial Economics, Elsevier, vol. 27(2), pages 315-353, October.
- Pompe, Paul P.M. & Bilderbeek, Jan, 2005. "The prediction of bankruptcy of small- and medium-sized industrial firms," Journal of Business Venturing, Elsevier, vol. 20(6), pages 847-868, November.
- Berger, Allen N & Udell, Gregory F, 1995. "Relationship Lending and Lines of Credit in Small Firm Finance," The Journal of Business, University of Chicago Press, vol. 68(3), pages 351-81, July.
- Amemiya, Takeshi, 1973. "Regression Analysis when the Dependent Variable is Truncated Normal," Econometrica, Econometric Society, vol. 41(6), pages 997-1016, November.
- Orbe, Jesus & Ferreira, Eva & Nunez-Anton, Vicente, 2001. "Modelling the duration of firms in Chapter 11 bankruptcy using a flexible model," Economics Letters, Elsevier, vol. 71(1), pages 35-42, April.
- Cole, Rebel A., 1998. "The importance of relationships to the availability of credit," Journal of Banking & Finance, Elsevier, vol. 22(6-8), pages 959-977, August.
- Diamond, Douglas W, 1984. "Financial Intermediation and Delegated Monitoring," Review of Economic Studies, Wiley Blackwell, vol. 51(3), pages 393-414, July.
- Boot, Arnoud W. A., 2000. "Relationship Banking: What Do We Know?," Journal of Financial Intermediation, Elsevier, vol. 9(1), pages 7-25, January.
- Ongena, Steven & Smith, David C., 2000. "What Determines the Number of Bank Relationships? Cross-Country Evidence," Journal of Financial Intermediation, Elsevier, vol. 9(1), pages 26-56, January.
- Li, Kai, 1999. "Bayesian analysis of duration models: an application to Chapter 11 bankruptcy," Economics Letters, Elsevier, vol. 63(3), pages 305-312, June.
- Denis, Diane K. & Rodgers, Kimberly J., 2007. "Chapter 11: Duration, Outcome, and Post-Reorganization Performance," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 42(01), pages 101-118, March.
- Richard E. Caves, 1998. "Industrial Organization and New Findings on the Turnover and Mobility of Firms," Journal of Economic Literature, American Economic Association, vol. 36(4), pages 1947-1982, December.
- B. Leyman & K. Schoors, 2008. "Bank Debt Restructuring under Belgian Court-Supervised Reorganization," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 08/508, Ghent University, Faculty of Economics and Business Administration.
- White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
- Marc Deloof, 2003. "Does Working Capital Management Affect Profitability of Belgian Firms?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 30(3-4), pages 573-588.
- Couwenberg, Oscar, 2001. "Survival rates in bankruptcy systems : overlooking the evidence," Research Report 01E15, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
- Prantl, Susanne, 2003. "Bankruptcy and Voluntary Liquidation: Evidence for New Firms in East and West Germany after Unification," ZEW Discussion Papers 03-72, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Silviano Esteve-Pérez & Juan Mañez-Castillejo, 2008. "The Resource-Based Theory of the Firm and Firm Survival," Small Business Economics, Springer, vol. 30(3), pages 231-249, March.
- Oscar Couwenberg, 2001. "Survival Rates in Bankruptcy Systems: Overlooking the Evidence," European Journal of Law and Economics, Springer, vol. 12(3), pages 253-273, November.
- Chowdhury, Shamsud D. & Lang, James R., 1996. "Turnaround in small firms: An assessment of efficiency strategies," Journal of Business Research, Elsevier, vol. 36(2), pages 169-178, June.
- Joel Rogers & Wolfgang Streeck, 1995. "Works Councils: Consultation, Representation, and Cooperation in Industrial Relations," NBER Books, National Bureau of Economic Research, Inc, number roge95-1, June.
When requesting a correction, please mention this item's handle: RePEc:vlg:vlgwps:2009-12. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Isabelle Vandenbroere)
If references are entirely missing, you can add them using this form.