Bankruptcy Risk and Productive Efficiency in Manufacturing Firms

Becchetti LeonardoSierra Gonzalez Jaime Humberto
CEIS Research Paper
The paper investigates the determinants of bankruptcy in three representative unbalanced samples of Italian firms for the periods 1989-1991, 1992-94 and 1995-97. Two important results are that: i) the degree of relative firm inefficiency measured as the distance from the efficient frontier has significant explanatory power in predicting bankruptcy ii) qualitative regressors such as customers' concentration and strength and proximity of competitors have significant predictive power and suggest that banks should not restrict their monitoring activity to balance sheet variables. These findings remain significant after controlling for balance sheet liquidity and profitability variables usually considered in these estimates
Number: 30
Keywords: bankruptcy prediction, stochastic frontiers, qualitative indicators
JEL codes: G21, D21
Date: Monday, August 11, 2003
Revision Date: Monday, August 11, 2003