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Does size matter in predicting SMEs failure?

Lookup NU author(s): Dr Mariachiara Barzotto

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This is the authors' accepted manuscript of an article that has been published in its final definitive form by John Wiley & Sons Ltd., 2018.

For re-use rights please refer to the publisher's terms and conditions.

Abstract

This study acknowledges the diversity between micro, small, and medium‐sized firms while predicting bankruptcy and financial distress of the United States small and medium‐sized enterprises. Empirical findings suggest that survival (failure) probability increases (decreases) with increasing firm size and firms in different size categories have varying determinants of bankruptcy, whereas factors affecting their financial distress are mostly invariant. Magnitude of significant covariates changes across the size categories of both bankrupt and financially distressed firms. Further, operating cash flow information does not add any marginal increment in prediction performance of multivariate hazard models above baseline models developed using information from income statements and balance sheets. This result holds for failure likelihood of small and medium‐sized enterprises and their respective size categories.

Publication metadata

Author(s): Gupta J, Barzotto M, Khorasgani A

Publication type: Article

Publication status: Published

Journal: International Journal of Finance & Economics

Year: 2018

Volume: 23

Issue: 4

Pages: 571-605

Print publication date: 11/10/2018

Online publication date: 25/07/2018

Acceptance date: 20/06/2018

Date deposited: 02/11/2018

ISSN (print): 1076-9307

ISSN (electronic): 1099-1158

Publisher: John Wiley & Sons Ltd.

URL: https://doi.org/10.1002/ijfe.1638

DOI: 10.1002/ijfe.1638

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