Corporate failure : A literature review

Abstract

This paper provides a comprehensive overview of the corporate failure phenomenon, shedding light on its intricate nature, which has been a subject of continuous exploration since the Great Depression of 1929. This article adopts a methodological approach centered on a meticulous review of the relevant body of work. The findings of this analysis reveal that corporate failure can be defined as a gradual and complex process, resulting from a combination of various factors and events, including economic, financial, legal, and sometimes organizational aspects. This ultimately leads to the company's inability to sustainably fulfill its financial and operational obligations. Typically, failure is anticipated once signs of bankruptcy have been observed. In this context, the article extensively explores the mechanisms of corporate failure as initially formulated by the early pioneers in this discipline. Moreover, it conducts a comprehensive critical assessment of different models for predicting corporate failure.