Financial And Economic Determinants Of Firm Default
Source: Scuola Superiore Sant'Anna
This paper investigates the relevance of financial and economic variables as determinants of firm defaults. This analysis is not limited to publicly traded companies but extends to a large sample of limited liability firms. The authors consider size, growth, profitability and productivity together with a standard set of financial indicators. Non parametric tests allow to assess to what extent defaulting firms differ from the non-defaulting group. Bootstrap probit regressions confirm that economic variables play both a long and short term effect. These findings are robust with respect to the inclusion of Distance to Default and risk ratings among the regressors.