The survival of a company finds its limit in the problems faced throughout its existenceand which are likely to lead her to failure. Indeed, the company can be affected duringits existence by several parameters that can compromise its durability, among which wemention: continuous or discontinuous decrease of activity, loss of business orders, debtrecovery problems, imbalanced financial structure or a small capitalization,governmental tax adjustment, shareholders changes, key man death, social movement,etc. This makes business failure a transversal, dynamic and complex concept includingmany sides and multiple definitions.The aim of this paper is to highlight the contribution of various studies dedicated tobusiness failure. An in-depth analysis of the literature as well as the factors explainingdistress, leads us to develop a research model of business failure based on a financialapproach.
Cooperatives all over the world are said to be imbued with inherent weaknesses and challenges, and therefore, steering these entities towards sustainability is seen as an uphill climb. This paper delves into the reasons why some cooperatives in the Philippines dissolve or stop operating. Specifically, the study aimed to review the literature on factors affecting cooperative business sustainability and failures, to present and analyze two cases of failed multipurpose cooperatives and offer recommendations on operating cooperatives for their continued sustainability. Data was gathered through key informant interviews and secondary sources, and analyzed using the case approach and descriptive analysis. Extant literature primarily pinpointed issues such as poor management, lack of capital, property rights, and portfolio problems as the culprits behind cooperative conversions, failures and restructurings. What made the two multipurpose cooperatives unsustainable were the insufficiency of funds needed to meet Cooperatives Development Authority (CDA) requirements, delinquency of members and their inactive participation in cooperative affairs, mismanagement of resources, absence of a viable marketing system and the lack of a capable financial manager. Cultivating managerial and leadership skills, improving governance, establishing private sector and government linkages and support, encouraging participatory membership, utilizing an effective marketing system, proper resource management and expanding financial knowhow are suggested to achieve cooperative sustainability.
The use of statistical models to predict business failures has received considerable attention in recent decades. However, very few studies have been devoted to predicting failures of cooperative societies, which play an important social and economic role in many sectors and possess certain characteristics that distinguish them from investor-owner companies. This paper develops a statistical business failure prediction model specifically for cooperative societies and identifies the most powerful predictive variables. This is done by applying logistic regression to a sample of Spanish agricultural cooperatives with financial indicators as explanatory variables. The prediction models obtained, capable of predicting failures one or two years before they actually happen, reached an accuracy level of more than 94%. The best predictors confirmed the importance to cooperatives of having a minimum amount of capital available to ensure their financial independence, which could be put at risk by virtue of the cooperative principle of ¿voluntary and open membership¿, especially when financial problems appear on the horizon. The importance of the results-based indicators was also shown, which could be considered as obvious, given that the objectives of cooperative societies is to obtain the greatest possible advantage from the activities carried out for their members. ; Mateos Ronco, AM.; López Mas, Á. (2011). DEVELOPING A BUSINESS FAILURE PREDICTION MODEL FOR COOPERATIVES: RESULTS OF AN EMPIRICAL STUDY IN SPAIN. African Journal of Business Management. 5(26):10565-10576. doi:10.5897/AJBM11.1415 ; S ; 10565 ; 10576 ; 5 ; 26
This study aims to uncover the chain of Village Owned Enterprises (BUMDes) business failures in the West Halmahera Regency. BUMDes business is a village government business that is run to achieve the goals of profit and society welfare. Empirical facts show that after the Village formed BUMDes and made a sizeable Equity Participation in BUMDes, what happened was that BUMDes BUMdes businesses experienced suspended animation. As a result, until now, the existence of BUMDes has not been able to contribute to Village Original Revenue and improve the welfare of rural communities as expected by the Village and the Community. The researcher uses a qualitative approach with the Transcendental Phenomenology method to achieve this goal. The research information includes elements of the village government, BUMDes managers, and village communities who have been in contact with BUMDes. The study results provide evidence that the failure of the BUMDes business is caused by the high conflict of interest of the village head and the indifference of the Village Consultative Body (BPD) towards BUMDes. This research contributes theoretically to the development of regional financial management science and information material for the West Halmahera Regency Government to make it easier for local governments to break the chain of failure of the BUMDes business.
In light of growing scholarly works on business failure across the social science domains, it is surprising that past studies have largely overlooked how extreme environmental shocks and 'black swan' events such as those caused by the coronavirus (COVID-19) pandemic and other global crisis, can precipitate business failures. Drawing insights from the current literature on business failure and the unfolding event of COVID-19, we highlight the paradoxes posed by novel exogenous shocks (that is, shocks that transcend past experiences) and the implications for SMEs. The pandemic has accelerated the reconfiguration of the relationship between state and markets, increasing the divide between those with political connections and those without, it may pose new legitimacy challenges for some players even as others seem less concerned by such matters, whilst experiential knowledge resources may be both an advantage and a burden.
The paper investigates risk factors of business failure of small-sized manufacturing firms in Sweden. Traditionally, linear models are applied to estimate the influence of risk factors on business failure by using continuous data. By contrast, in this study a count data approach is employed to deduce consistent Poisson, Quasi-Poisson, and Negative-Binomial estimators by using bankruptcy count data of small-sized Swedish manufacturing firms. Findings confirm that interest and exchange rates are significant determinants of business failure. Moreover, we found that openness is a determinant of business success. Our main finding highlights the role of business productivity, which turned out to be the main risk factor of business failure.
Two events are currently changing the landscape for business restructurings in the European Union: the 'Restructuring Recommendation' (RR) of the European Commission, issued in 2014, and the 2015 recast of the European Insolvency Regulation (EIR). In this paper, we critically review the RR and put it into the context of the reform of the EIR. We find that the recast EIR and the RR do not dovetail perfectly—a restructuring proceeding as proposed by the RR would not necessarily be within the scope of the recast EIR; we also suggest that, in any case, the EIR is not optimally designed to facilitate restructurings, given its treatment of secured creditors. Regarding the regulatory approach pursued in the RR, the Commission rightly pushes towards harmonisation with respect to Member States' restructuring regimes—regulatory competition is not a sensible regulatory alternative in this area. However, we criticise both the methodology and scope of the harmonisation proposal of the RR: sketchy minimum harmonisation of restructuring rules leaves huge potential for residual diversity in Member States' restructuring laws, and the Commission's narrow focus on restructuring proceedings ignores several aspects of the complicated interaction between the Member States' formal insolvency laws and the restructuring mechanism proposed. Further, we disagree with the substantive recommendations for Member States' restructuring laws suggested by the RR: they wrongly require financial difficulties or a likelihood of insolvency as an entry test for the recommended restructuring proceeding, and the process appears susceptible to abuse by sophisticated financial investors—it does not provide for the mandatory appointment of a supervisor and allows significant curtailments of creditor rights without sufficient safeguards in place. Instead, we propose an efficient debtor-in-possession (DIP) regime as an alternative that could be initiated regardless of a firm's solvency, provided that it is economically viable and that the filing is not ...
This study aims to uncover the chain of Village Owned Enterprises (BUMDes) business failures in the West Halmahera Regency. BUMDes business is a village government business that is run to achieve the goals of profit and society welfare. Empirical facts show that after the Village formed BUMDes and made a sizeable Equity Participation in BUMDes, what happened was that BUMDes BUMdes businesses experienced suspended animation. As a result, until now, the existence of BUMDes has not been able to contribute to Village Original Revenue and improve the welfare of rural communities as expected by the Village and the Community. The researcher uses a qualitative approach with the Transcendental Phenomenology method to achieve this goal. The research information includes elements of the village government, BUMDes managers, and village communities who have been in contact with BUMDes. The study results provide evidence that the failure of the BUMDes business is caused by the high conflict of interest of the village head and the indifference of the Village Consultative Body (BPD) towards BUMDes. This research contributes both theoretically to the development of regional financial management science and being information material for the West Halmahera Regency Government to make it easier for local governments to break the chain of failure of the BUMDes business.
This article contemplates the individual level socioeconomic consequences of bankruptcy by studying market-oriented, self-employed people in Jyvaskyla, a small town in central Finland. The article asks if poverty and social loss were inevitable consequences of urban business failure and also seeks to explain why some recovered and others did not. Through the method of collective biography and by utilizing a varied selection of legal documents and parish and governmental materials, this article shows that, even though a bankruptcy could cause serious financial and economic outcomes, and even proletarianize a debtor, impoverishment was not the inevitable consequence of bankruptcy. These bankrupts from the middle social stratum had means to cope. Moreover, the variation between individuals in the consequences of business failure is shown to be contingent upon the existence of certain preconditions, such as the amount of bad debt and the practice of proper behavior. ; peerReviewed
In: Hack-Polay , D , Igwe , P A & Madichie , N O 2020 , ' The role of institutional and family embeddedness in the failure of Sub-Saharan African migrant family businesses ' , International Journal of Entrepreneurship and Innovation , vol. 21 , no. 4 , pp. 237-249 . https://doi.org/10.1177/1465750320909732
There is considerable interest among European politicians and policymakers in how to integrate migrants in the local and national economy. Drawing on in-depth qualitative interviews with 20 owners of Sub-Saharan African migrant family businesses (SSAMBs) in the United Kingdom, this article critically examines why SSAMBs fail or underperform. This investigation draws upon three streams of literature – notably migrant business failure, institutional theory and family embeddedness. The findings highlight the challenges of doing business and the reasons for business failure among this group. These are different from other small businesses and include culture, family interference and ethnicity. The main contribution of the article lies in the development of a conceptual model that highlights the relationships between institutional contexts and migrant family business outcomes. The model proposes that institution and family embeddedness results in the enactment of ethnic behaviours that drive migrant businesses into cultural markets leading to business underperformance or failure.
Najvažniji izvor zapošljavanja su mala i srednja poduzeća, kojih nažalost više propadne nego uspije, što uzrokuje strah od poduzetništva. Cilj istraživanja bio je ustanoviti stope preživljavanja poduzeća u Republici Hrvatskoj i Europskoj uniji (EU), kako poduzetnici proživljavaju poslovni neuspjeh te kakva bi im stručna pomoć trebala da se što prije oporave i motiviraju za drugu poduzetničku šansu. Provedeno je istraživanje literature i sekundarnih izvora o demografiji poduzeća u EU i Republici Hrvatskoj te mjerama pomoći koje predlaže Europska komisija. Stopa preživljavanja poduzeća pet godina nakon osnivanja u EU je prosječno oko 20%, a u Hrvatskoj oko 18 %. Intervjuirano je šest hrvatskih poduzetnika koji su bar jednom preživjeli poslovni neuspjeh i odlučili pokušati ponovo. Uz nedovoljnu pripremljenost pothvata, neiskustvo i nedovoljna menadžerska znanja, kao uzrok propasti svojih poduzeća naveli su tešku ekonomsku situaciju i odlazak partnera. Preživjeli su koristeći podršku obitelji i dvojni proces žalosti što im je pomoglo umanjiti sekundarne izvore stresa. Kao pouku iz doživljenog neuspjeha navode strpljivost, upornost, ne odustajanje od svojih ciljeva, pronalaženje efikasnih rješenja, pozitivniji način razmišljanja, duhovni rast i novi sustav vrijednosti, što im je davalo motivaciju za drugu poduzetničku šansu. Učinkovita stručna pomoć morala bi se nastavljati na preventivne programe ranog upozorenja i zakonodavstvo koje bi poštenim poduzetnicima omogućilo što brži i bezbolniji stečaj. Stručna pomoć za vrijeme i nakon stečaja trebala bi biti poslovna, pravna i psihološko-duhovna, kao kombinacija informiranja, obrazovanja i osobnog savjetovanja. Morala bi se nadopunjavati podrškom obitelji i kolega poduzetnika koji su već prošli sličnu situaciju. ; The most important sources of employment are small and medium-sized businesses, which, unfortunately, tend to fail, causing fear of entrepreneurship. The aim of the research was to establish the survival rate of companies in Croatia and the EU, as entrepreneurs experience business failure, and to determine the professional assistance that would be required to recover and motivate them for a second entrepreneurial chance. A survey of the literature and secondary sources on enterprises demography in the EU and the Republic of Croatia was carried out, as well as the aid measures proposed by the European Commission. The survival rate of a company five years after its establishment in the EU is, on average, about 20%, and around 18% in Croatia. The six Croatian entrepreneurs that had been interviewed survived business failure at least once and decided to try again. Along with insufficiently prepared research, inexperience and insufficient managerial knowledge, they indicated difficult economic situation and departure of partners as reasons their companies collapsed. They survived with family support and by using the Dual Process Model of Grief, which helped them reduce secondary sources of stress. As the lessons learned from the experience of failure, they mention patience, persistence, not abandoning their goals, finding effective solutions, a more positive way of thinking, spiritual growth, and a new value system, providing them with motivation for a second chance. Effective expert assistance should continue through precautionary early warning programs and legislation, which would allow the bankruptcy to be as quick and as painless as possible for honest entrepreneurs. Expert assistance should be available during and after the bankruptcy. Specifically, business-related, legal, as well as psychological and spiritual assistance, as a combination of information, education and personal counseling. It should complement the support of their families and fellow entrepreneurs who have already been in a similar situation.
We estimate the impact of the COVID-19 crisis on business failures among small and medium-size enterprises (SMEs) in seventeen countries using a large representative firm-level database. We use a simple model of firm cost minimization and measure each firm's liquidity shortfall during and after COVID-19. Our framework allows for a rich combination of sectoral and aggregate supply, productivity, and demand shocks. We estimate a large increase in the failure rate of SMEs under COVID-19 of nearly 9 percentage points, absent government support. Accommodation and food services; arts, entertainment, and recreation; education; and other services are among the sectors most affected. The SME jobs at risk due to business failures related to COVID-19 represent 3.1 percent of private sector employment. Despite the large impact on business failures and employment, we estimate only moderate effects on the financial sector: the share of nonperforming loans on bank balance sheets would increase by up to 11 percentage points, representing 0.3 percent of banks' assets, and would result in a 0.75 percentage point decline in the common equity tier 1 capital ratio. We also evaluate the cost and effectiveness of various policy interventions. The fiscal cost of an intervention that narrowly targets at-risk firms can be modest (0.54 percent of gross domestic product). However, at a similar level of effectiveness, nontargeted subsidies can be substantially more expensive (1.82 percent of gross domestic product). Our results have important implications for the severity of the COVID-19 recession, the design of policies, and the speed of the recovery.
Featuring panelists Jeffrey Zander - CEO and managing partner of Zander Insurance Group and Jerry Patnode - Chair of School of Business at York College, advertising, copyrighter, producer, founded 4 companies. Panelists discuss what caused them to "fail", lessons they learned (like needing a full business plan), and how to learn from their mistakes. Helpful for entrepreneurs just starting their businesses.
There is considerable interest among European politicians and policymakers on how to integrate migrants in the local and national economy. Drawing on in‐depth qualitative interviews with 20 owners of Sub-Saharan African migrant family businesses (SSAMBs) in the UK, this article critically examines why SSAMBs fail or underperform. This investigation draws upon three streams of literature – notably migrant business failure, institutional theory and family embeddedness. The findings highlight the challenges of doing business and the reasons for business failure among this group. These are different from other small businesses and include culture, family interference and ethnicity. The main contribution of the paper lies in the development of a conceptual model that highlights the relationships between institutional contexts and migrant family business outcomes. The model proposes that institution and family embeddedness results in the enactment of ethnic behaviours that drives migrant businesses into cultural markets leading to business underperformance or failure.