Search results

The purpose of this paper is to show that previous research about financial and non‐financial causes of bankruptcy has neglected the time dimension of failure. The paper seeks to gain deeper insight into the failure process of a company, giving it a more grounded understanding of the relationship between the characteristics of a company, the underlying causes of failure and the financial effects.

The findings are based on a literature overview and in‐depth case study research.

Four types of failure processes were observed: the failure process of unsuccessful start‐ ups, the failure process of ambitious growth companies, the failure process of dazzled growth companies, and the failure process of apathetic established companies. Between these four failure processes, there exist major distinctions in terms of the presence and the importance of specific causes of bankruptcy, i.e. errors made by management, errors in the corporate policy and the importance of external factors.

The results of the study are based on qualitative, case study research. No attempt is made to quantify the existence and the importance of the findings. The major constructs that emerged as important in the research are well‐known concepts in the management literature. As a consequence, they should be further developed in order to quantify their effect in large‐scale studies.

Based on the findings, stakeholders of a company can have a clearer view of both the time dimension inherent in corporate failure and the impact of their own actions on bankruptcy.

The paper lays the ground for understanding the process of company failure. Company failure does not happen overnight and therefore a longitudinal and holistic perspective is needed.

The paper seeks to identify the determinants of business failure in construction and to predict the failure likelihood of construction companies by assessing their current situation based on both company‐specific and external factors.

A conceptual model is designed based on an extensive literature survey. The analytical network process together with the Delphi method is utilised to compute the importance weights of variables on business failure through interviews and discussions with experts. The applicability of the proposed model is tested on five companies to estimate their failure likelihood by using the findings derived from the analysis.

The results suggest the importance of organisational and managerial factors, including the efficiency of the value chain at the corporate level, the appropriateness of organisational decisions, and the availability of intangible resources for the survival of construction companies.

The findings of the analysis are limited to the experiences of three professionals in the Turkish construction industry. The performance of the model is only tested in five companies. The accuracy of the model may be improved by using the diverse experiences of a larger group of experts.

The proposed tool may act as an early warning system for construction companies by estimating the level of their failure likelihood. Companies may benefit from the findings of the model to assess their current situations and take necessary action to avoid possible business failures.

The knowledge and experiences of experts are used to obtain a complete model that accommodates both external and company‐specific variables, and more importantly the inter‐relations among them. Similar models may also be developed for companies in other industries to diagnose their bankruptcy or failure likelihood.

The setting of private finance companies that failed in New Zealand during 2006-2012 was characterized by weaker corporate governance and enforcement of securities law. This paper aims to explore audit failure in this setting and examine whether auditors erred in their audits of the failed finance companies and whether the audit failure rate of Big N auditors was different from that of non-Big N auditors.

This paper adopts the archival research method and uses three sets of evidence to assess audit failure – the frequency of going concern opinion (GCO) prior to failure, misstatements in the last audited financial statements, and the violation of the Code of Ethics.

The study finds that only 41 per cent of the sample companies received the GCO in their last audit prior to failure and provides evidence of material misstatements in the financial statements of a number of failed finance companies that received clean audit opinions prior to failure and breaches of the Code of Ethics by a number of auditors. These results strongly indicate audit failure for a number of failed finance companies. The audit failure rate, however, appears less for Big N auditors than for non-Big N auditors.

The study draws attention of the stock market regulator and the accounting profession to an area, the audit of private finance companies, that needs better quality audits.

This paper provides systematic evidence of audit failure in failed finance companies in New Zealand. It also furnishes preliminary evidence of Big N auditors compensating for weaker corporate governance.

The objectives of this study are to offer cash based funds flow components as an alternative to financial ratios for classifying the financial performance of companies; to test empirically the ability of funds flow components to distinguish between failed and nonfailed companies with special emphasis on working capital components; to analyse the empirical results and make recommendations for future study.

This paper aims to examine how observers evaluate a company that provides service failure (or excellence) to an immoral versus a moral customer. This study introduces the concept of deservingness to the service literature and suggests that observers appreciate when a company delivers “justice” – either bad service to an immoral customer or good service to a moral customer – and thus evaluate the company more favorably.

This paper presents three online studies using scenarios (ns = 205, 199 and 181) and one lab study (n = 89) using a confederate to manipulate customer morality.

Across four studies, this study finds that a service failure has a less negative impact on observers’ company evaluations when observers consider the target customer immoral, and thus deserving of the bad outcome. Conversely, the positive impact of observing service excellence is enhanced when observers consider the target customer to be moral, and thus deserving of a good outcome. This effect occurs because the perception of deservingness leads observers to experience more positive feelings about the service outcome and these positive feelings transfer over to observers’ evaluations of the service provider.

The mechanism shares some similarities with the concept of immanent justice reasoning, whereby individuals draw a causal link between someone’s prior immoral behavior and an unrelated negative outcome. However, the studies go one step further by showing that such causal reasoning, at least on a moral level, can impact the judgments of the other party (in this case, the company involved in the service outcome).

Service providers need to be particularly attentive when serving customers who are viewed in a positive light, as an observed failure that affects a moral customer can be particularly damaging to company evaluations. Conversely, companies should make efforts to publicize when exceptional service is given to nice, admirable customers, as this is particularly effective at improving evaluations.

Researchers have examined how allocations of responsibility affect observers' evaluation of service encounters. This paper adds deservingness as an alternate mechanism and examines service excellence as well.

The purpose of the present study is to examine the failure factors for the construction firms in a developing nation. Furthermore, the comparison of failure factors for private and government firms are evaluated.

In the present study, comparison between private and government construction firms is done in the context of a construction firm failure. About 60 construction firms were selected in and around the Nashik region for the investigation, where a simple multi-attribute rating technique (SMART) is used for analysis purpose.

It is found that for private firms (private contractors and builders) lack of experience is the major factor for failure of the business as against lack of managerial experience is a critical factor in case of a government contractor.

The outcome of the present study will be used to guide the policymakers during the implementation of governmental and private projects in order to lessen the construction project failures.

Construction company failure is an important aspect in developing countries like India. The limited studies were available in literature which shows failure factors for government and private firms and distinguished them. Hence, the present study extends the construction company failure literature by focusing on government and private firms. Also, the study provides some theoretical guidelines for management to avoid construction company failure in India.

The purpose of this paper is to explore the relationship of non-financial and financial factors to firm survival, provide evidence of factors related to financial success and distress for prominent Australian agricultural firms, and improve the predictive capacity of financial failure models.

The paper utilizes mixed method exploratory case studies across four Australian agricultural firms (two successful and two failed) listed on the Australian Securities Exchange.

The authors found that the use of an Integrated Multi-Measured approach provided a higher classification rate for the failed group than those provided by an individual measure. We also discovered that non-financial factors associated with the agricultural organizations studied impacted their success or failure. These factors included managements’ involvement in organizational strategy and the composition of the board of directors. It was also apparent that management decision-making approaches may become frozen, or at best restricted, in the face of impending failure, dependent upon the stress level within the organization and the management skill base.

The cases studied indicated that non-financial factors of failure occurred prior to any financial predictors, intuitively indicating a relationship between non-financial and financial factors in Australian agricultural firms.

The identification of financial and non-financial factors and sound internal processes which distinguish successful and failing firms can be utilized for the development of an early warning predictor of organizational success or failure.

Reviews previous research on the links between business failures, macroeconomic conditions and insolvency law; and develops a mathematical, econometric model to investigate them further, using 1996‐1998 UK data. Presents and discusses the results, which suggest that the 1986 Insolvency Act did help to reduce the overall level of business failures and estimates that it saved 1100 companies from bankruptcy in the first three years after implementation. Finds that interest rates, price levels, levels of business formation, credit conditions and profit levels also affect business failure rates.

The objective of the research presented in this paper is to explore the factors associated with company failures in the context of the construction industry. To that end, the four quadrants of an ‘environment/response’ matrix developed by Boyle & Desai (1991. Journal of Small Business Management, 29, 33–42) are populated with Dun and Bradstreet's US business failure data for the construction industry. The study indicates that budgetary and macroeconomic issues represent 83% of the reasons for construction company failures. This implies that firms that take vigorous administrative measures to address budgeting issues and that react promptly to economic conditions by implementing appropriate strategic policies should be able to avoid failure. On the other hand, issues of adaptability to market conditions and business issues appear to have limited effects on company survivability (6% of the reasons for failure). This implies that administrative measures to fend off internal conflicts that originate for reasons beyond management's control and long‐term strategic decisions to regulate the firm's adaptation to market conditions can also help to prevent failure. An ‘input/output’ model appears to explain the business failure phenomenon better than the ‘environment/response’ one.

The purpose of this paper is to investigate the relationship of financial ratios and non-financial factors of successful and failed corporations in the USA. Specifically, the authors provide evidence on whether financial ratios and non-financial factors can be jointly included as indicators to improve the predictive capacity of organisational success or failure in different countries and sectors.

The paper utilises a mixed method exploratory case study focussing on listed corporations in the US and Australian manufacturing, agriculture, finance and property sectors.

The financial ratio findings demonstrate that (with the exception of the failed Australian manufacturing sector) the integrated multi-measure (IMM) ratio approach consistently provides a higher classification rate for the failed and successful groups than those provided by an individual measure. In all cases the IMM method scored higher for US companies (with the exception of the failed Australian property sector). The findings also show that irrespective of the country location or sector, non-financial factors such as board composition and managements’ involvement in organisational strategy impact on a corporation’s success or failure.

The findings reveal that non-financial factors occur prior to financial ratios when attempting to predict organisational success or failure and the IMM approach enables a more thorough examination of the predictive ability of financial ratios for US and Australian organisations. This intuitively indicates that when combined with financial ratios, non-financial factors may be a useful predictor of corporate success or failure across countries and sectors.

Sound internal processes and the identification of both financial ratios and non-financial factors can be utilised to improve the reliability of financial failure models, enable corrective and preventative steps to be implemented by management and potentially reduce the costs of failure for US and Australian organisations.