¶ … causes of business failure and bankruptcy has, in the past, primarily focused on the financial symptoms of the failure and usually not the underlying causes. When a study takes into account other, non-financial, factors they usually limit themselves or focus only on specific kinds of businesses. As a result there has never been a comprehensive approach to studying the causes of bankruptcy in relation to the behavior of the company and the financial situation at the time. Therefore the authors of the article "Failure processes and causes of company bankruptcy: a typology," have attempted to provide the first all-encompassing study on the causes of bankruptcy.
In order to accomplish this goal the researchers chose to study 12 Belgian companies that have filed for bankruptcy as the source material for their case studies. The companies selected varied in size, age, and industry and were only chosen if the appropriate data could be obtained. Both financial and non-financial information was obtained, including...
A case study was generated for each company which included the company's history, financial statements, and a description of the cause of bankruptcy, which was analyzed for the current study.
Once the data was complied and analyzed the researchers observed certain results, primarily that there were four types of bankruptcy developments in companies. These included the failure of the start-up business, the failure of ambitious growth companies, the failure of dazzled growth companies, and the failure of apathetic, but well-established, companies. Moreover, each of the four types of businesses had their own problems which were unique to their situation and were the cause of bankruptcy; including bad management, incorrect policies, and external factors. In other words, depending on the type of business involved, its age and management style, the research indicated that its…
