Business failure and exit: determinants on the length of the exit path
Balcaen, Sofie Ooghe, Hubert
Balcaen, Sofie
Ooghe, Hubert
Citations
Altmetric:
Publication Type
Journal article
Editor
Supervisor
Publication Year
2006
Journal
Bank- en Financiewezen
Book
Publication Volume
70
Publication Issue
2
Publication Begin page
54
Publication End page
61
Publication NUmber of pages
Collections
Abstract
This paper analyses the duration of the time to exit of distressed firms, differentiating between court driven exits (mainly bankruptcies) and voluntary liquidations. It examines how long firms survive after initial signs of economic distress. The study is conducted on an extensive dataset of 5,233 Belgian distress-related exits of mature firms, the majority being privately held. The results highlight that slack resources have an opposite effect on the timing of court driven exits and voluntary liquidations. On the one hand, high levels of available and potential slack increase the time to court driven exit, as they allow distressed firms to postpone an impending court driven exit. On the other hand, high available slack resources shorten the time to voluntary liquidation, since they make voluntary liquidation easier. Further, a high level of stakeholder dependence increases the time to exit after distress, whether the firm exits through voluntary liquidation or through a court decided exit. This is explained by the fact that stakeholder dependence increases the complexity of the exit decision and the exit procedure.
Research Projects
Organizational Units
Journal Issue
Keywords
Corporate Finance